But the British number one was outclassed in his first Grand Slam quarter-final in less than two hours.
"In the past when I've played him, I felt I had a chance to dictate the rallies early on but he's hitting the ball so fast," said Murray.
"I had no chances at all on his serve and he deserved it.
"He's taking the ball early, and playing aggressive from the first shot, which I don't feel he was doing before.
"If he plays like that and returns like that, he's very close to being the favourite for the title. He was close last year and he's playing better than that now."
Interview: Rafael Nadal
Murray appeared exhausted after his epic win over Gasquet, but he denied it had been a factor in the result.
"I felt like I recovered well. I didn't feel like my legs were all that heavy. That had absolutely no bearing on the result at all."
And Murray vowed to return to Wimbledon a better player and still believed he could one day win the title.
"I have to view it as a good thing. I can improve so many things in my game and it's up to me to do that," he said.
"Rafa's improved so many things in his game on grass. I have to look at my game, work on some things and try to get up to that level. I do think it's possible.
"I have to try to be positive. Obviously, it's the furthest I've been in a Slam. The Gasquet match is one of the best I've ever played in and I played three solid matches before that.
"I got further than my seeding and I'm going to be back in the top 10 next week."
Nadal said that he was close to the top of his game during the match.
"The second half of the first set and the second set was my best match here," he said.
"Today was a special match, playing against Andy for a place in the semi-final. I was playing very well before this match and I played very well again.
"I tried to hit the ball close to the lines every time. I tried to play a higher rhythm than him. It was one of my best days here."
Bookmark with:
What are these?