Nvidia (NASDAQ:NVDA) was one of the best-performing large-cap stocks last year. Over the past year, the share price has increased by 141%, and the market capitalization is now as much as $3.37 trillion.

However, given all the praise, some rightly argue that given the size of the existing move, further gains may be more arduous to achieve. Let’s explore.

Why stocks jumped so much

The development of artificial intelligence (AI) was a key factor in Nvidia’s sturdy performance. More specifically, it uses generative artificial intelligence technologies such as OpenAI’s ChatGPT. This is because graphics processing units (GPUs) manufactured by Nvidia are crucial in training and deploying artificial intelligence models. That’s why it is now the preferred supplier for companies investing in AI infrastructure.

The massive demand for GPUs made the 2024 financial results exceptional, both in terms of revenue and profitability. The scale of growth can be seen in the latest quarterly results from November. In the fiscal third quarter, revenues reached $35.08 billion. This is an raise of 94% compared to the same quarter of the previous year!

A higher benchmark

Last month I wrote about how 2025 may be a more arduous year for Nvidia. This isn’t just because the company has more competition. Rather, the bar is now set so high when it comes to financial performance and processor improvements that it will be almost impossible to impress investors.

Take, for example, the 94% revenue raise since November. If the next quarterly results show growth of, say, 10%, I expect it could cause panic among investors. However, for most companies, a 10% raise in revenue over last year would be cause for celebration.

These high expectations could hinder the stock’s further growth potential. This can happen even if the company as a whole continues to grow and develop.

We’re talking about valuations

With a price-to-earnings (P/E) ratio of 54, it’s not a affordable stock. This does not mean that the share price cannot continue to rise, but it is unlikely that last year’s bull run will repeat itself. For example, if the share price doubled but earnings per share remained the same, the P/E ratio would be over 100. In my opinion, this would be a red flag because the stock is very overvalued.

However, Nvidia is a very unique company. This is a really good business for anyone who wants to leverage artificial intelligence. There is still huge potential and need for implementation in this sector. So the share price could continue to rise, driven less by fundamentals and more by investors’ desire not to miss out.

I won’t be buying Nvidia stock right now. While I believe the company has room for further growth, I believe there are more attractive AI stock options.