Here’s how long it’s taken £1k of Nvidia stock to turn into £10k today!
One of the big stock market tech stories of recent years has been the incredible growth of Nvidia (NASDAQ: NVDA). Over the past five years alone, Nvidia stock has soared by 1,410%.
So, how long has it taken to turn a £1,000 investment into a holding worth £10,000?
Stunning share price rise
The answer is around two and a half years.
Nvidia stock ended 2022 selling for less than a tenth of its current price. So, £1k invested in Nvidia stock then would be worth over £10k now.
That is even before taking dividends into account. That said, the current yield of 0.03% is not exactly the stuff of passive income dreams! Buying the shares at the end of 2022 would mean a yield today 10 times higher than 0.03% — but still well below 1%.
In this example, I have ignored the impact of exchange rate movements to keep things simple. In reality, though, such shifts are a risk of buying American shares as a UK investor. Sometimes they can reduce the overall return on an investment. But the opposite can also happen: it depends on which way (if any) the currency exchange rate moves during the lifetime of the shareholding.
Nvidia looks like a great business but may get even better
Even after that strong performance, Nvidia stock now sells for around 51 times earnings.
That is too high for my taste, which is why I have no plans to add the company to my portfolio for now. Still, it is quite striking that the price-to-earnings ratio is not even higher, given how brilliantly Nvidia stock has performed in recent years.
That reflects the fact that, while the share price has surged, so too have earnings.
Last year, for example, Nvidia reported basic earnings per share of $2.97. For 2022, the equivalent figure was $0.18.
So, while the share price has soared, it actually grew less quickly in that timeframe than earnings, meaning that Nvidia stock is arguably cheaper today than it was in 2022.
Can this sort of success continue?
Nvidia has a proven and massively profitable business model. It has a lot of proprietary chip designs as well as a sizeable existing client base. In the context of booming chip demand led by AI needs, that could mean that the business continues to grow at speed. This month Nvidia stock has hit an all-time high – but if the business keeps performing well, I reckon it may go even higher.
Why I’m waiting
However, while I see reasons to feel bullish about the outlook, the current stock price does not offer me the sort of margin of safety I look for when investing.
After all, the recent strong AI-fuelled chip demand could be the start of bigger things to come – but it may turn out to be a one-off blip before demand falls back to lower levels again.
Nvidia has a lot of proprietary knowledge but rivals are working very hard to steal their own march on selling chips. International trade disputes could also make it harder for Nvidia to keep growing in some markets.
The post Here’s how long it’s taken £1k of Nvidia stock to turn into £10k today! appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
More reading
- Where is the next Nvidia stock right now?
- Here’s why Nvidia stock could still be cheap
- Nvidia stock just hit an all-time high. So could it still make sense to buy?
- Nvidia stock: is it still worth buying after becoming the world’s largest company?
- Forget $200! Nvidia’s share price could hit $250, according to this broker
C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
