Nvidia Soars to Record High, Boosting Broad Market ETFs

The hottest stock of 2024 is off to another blazing start in 2025. Nvidia Corp., the AI chip giant, was up 13% on a year-to-date basis as of midday Monday—an impressive return just three days into the new year.

The surge put the stock back to all-time high levels for the first time since Nov. 7 and helped Nvidia reclaim the mantle of the world’s most valuable company by market cap.

In 2024, Nvidia soared 171%, the third-largest return among stocks in the S&P 500. 

Though few believe that Nvidia, with a $3.7 trillion market cap, will replicate those gains this year, hopes are high that the stock can continue to rally.

With a 7% weighting in the SPDR S&P 500 ETF Trust (SPY) and a 9% weighting in the Invesco QQQ Trust (QQQ), Nvidia is the most important stock within most broad market exchange-traded funds.

Nvidia Stock Success Hinges on Continuing AI Boom

An average of 57 analyst price targets compiled by Bloomberg suggests that the stock could reach $173 by year-end. 

Whether or not the stock can reach those lofty levels hinges on a continuation of the AI boom. Nvidia’s largest customers, including Microsoft Corp., Alphabet Inc., Amazon.com Inc., and Meta PLatforms Inc., have been spending heavily on the company’s AI chips to build large language models and AI applications.

These companies see artificial intelligence as a revolutionary technology that will radically transform businesses, industries, and society at large.

Nvidia’s chips power the computers that create and run AI systems. As those chips have gotten more powerful, so, too, have the capabilities of AI. As long as that relationship holds, Nvidia’s chips will likely stay in high demand.

That said, not everyone is bullish on the stock. 

Some argue that “scaling laws,” the observation that more computing power translates into more powerful AI models, are reaching their limits. Others say that the investment in AI infrastructure is far outpacing the demand for AI apps from end-users. Still others argue that Nvidia’s dominance in the market for AI chips will be challenged by competitors like Advanced Micro Devices Inc. and chips made by cloud computing companies and Nvidia customers like Amazon and Microsoft.

For now, however, those concerns have taken a backseat.