1 incredible metric that could make Nvidia stock a screaming buy

Nvidia (NVDA 0.76%) Profits have become a real event for investors. Given the company’s growth over the past two years, observers are excited to see what each quarterly result will bring. The rise of Nvidia has been a key driving force behind the growth of the broader stock market, so continued success is critical for any investor.

The third quarter of fiscal 2025 (ended October 27) did not disappoint, and I think there is a key number here that could get investors excited again.

Demand for Nvidia’s GPUs has never been higher

Nvidia’s main product is the graphics processing unit (GPU), which is often used in situations where extreme computing capacity is required. Its ability to process multiple calculations in parallel sets it apart from other computing devices and makes it a clear choice for workloads that require massive amounts of computing power, such as training an artificial intelligence (AI) model.

Demand for its GPUs has skyrocketed since the AI ​​arms race began, and Nvidia has benefited more than any other company in the market.

This was evident in the third quarter, when revenue rose 94% year-over-year to $35 billion, significantly exceeding management’s expectations. She only expected $32.5 billion in the third quarter, which would have represented 80% growth. That’s an incredible metric to focus on, but the future also looks bright. For the fourth quarter, management expects $37.5 billion, representing growth of 70%.

Although the trend is starting to decline, it is still an incredible number. Management has a history of exceeding sales expectations, so the actual number is likely slightly higher. I wouldn’t be surprised to see Nvidia continue to make strong predictions like this in 2025, as the company has many tailwinds blowing in its favor.

2025 looks to be another strong year for Nvidia

One risk with Nvidia is that a significant portion of its revenue is concentrated among a few customers. Four customers not named by Nvidia accounted for about 40% of Nvidia’s total revenue in the third quarter. If these customers stop spending, it could spell disaster for Nvidia. However, it is not difficult to find out who these companies are could and they all suggest that spending will only increase over the course of 2025.

A candidate for these mystery customers is Metaplatformswhich indicated that there would be a “significant increase in capital spending” in 2025. These expenses mainly relate to increasing computing capacity and benefit Nvidia. Other probably big customers, like Amazon And Microsofthave also pointed out that AI-related computing costs will increase in 2025. Currently, this concentration is not a problem for Nvidia; it’s a boost.

Another tailwind for Nvidia in 2025 is the launch of its Blackwell architecture. The performance improvement of this new product compared to the existing Hopper architecture is incredible. Blackwell offers four times the performance of Hopper as it only requires 64 Blackwell GPUs to run a benchmark test, compared to 256 Hopper GPUs. Blackwell production is in full swing and will continue to be ramped up. Management stated that demand far exceeds supply and sales are already exceeding expectations.

These are two huge tailwinds for Nvidia and a pretty good argument to buy the stock, at least on the growth side. However, the stock is still quite expensive overall and investors need to be comfortable with this risk. Nvidia stock trades at 51 times forward earnings.

NVDA PE Ratio (Forward) data from YCharts

That’s not a cheap number by any means and reflects several years of strong earnings growth in the share price. If Nvidia continues to grow at its current pace, the price you pay today won’t be that high. But if difficulties arise towards the end of 2025, it could become a problem.

It depends on how far you think AI expansion has progressed. If it has had its day, Nvidia is not a buy. But it can still be a worthwhile investment if it’s just starting out. There are many signs that we are only scratching the surface of what is possible with AI, which will lead to increased spending at Nvidia, especially with the introduction of the Blackwell architecture.

Even though I believe that Nvidia will not be able to match the performance of 2024 in 2025, I still believe that there is enough argument here that Nvidia can continue to beat the markets in the future.