How much would £5,000 put into Nvidia stock 5 years ago be worth now?

Over the past few years, Nvidia (NASDAQ: NVDA) has become the worldâs largest listed company thanks to a stellar stock market performance. Over the past five years, Nvidia stock has soared 1,354%.

What would that have meant in terms of investment returns â and might it still be worth me buying some Nvidia stock now, for the first time?

Serious wealth creator

Over five years, that soaring share price means that an initial Â£5,000 purchase of Nvidia stock would now be worth close to Â£73,000.

I am ignoring the impact of moving exchange rates, but as Nvidia is listed on a US stock exchange in dollars that would have had an impact on a UK-based investor. That would be fairly slight as the US dollar-to-pound exchange rate is within a couple of cents of where it was five years ago. But it is always worth bearing exchange rate risks in mind when investing in a share denominated in a foreign currency,

That increase from a Â£5,000 investment five years ago to a valuation close to Â£73,000 today is already the stuff of investor dreams. But wait â thereâs more!

The âmoreâ to which I refer is the dividend. With a yield of 0.02%, Nvidia is hardly a passive income powerhouse! But, still, Â£5,000 invested at the lower share price five years ago ought to yielding more and earning around Â£15 per year in dividends.

More excitingly, Nvidia is massively profitable, so I think it has the potential to fund a much richer dividends in future.

AI has been a boon for Nvidia

So, between share price growth and dividend prospects, could Nvidia stock make a good choice for my portfolio at the moment?

Past performance is not necessarily a guide to what will happen in future. That is important to remember, even though doing so can be difficult when looking at how well Nvidia stock has performed in recent years.

A lot of that strong performance reflects a boom in demand for chips to support companiesâ increased use of AI.

Without that, Nvidia would still have a sizeable business thanks to other applications such as gaming, but I do not think that could justify anything like its current $4.5trn market capitalisation.

Should I buy?

So, as a potential investor, a key question I am asking myself is what I think will happen to AI-related demand.

I do not know. We might only be in the early stages of AI demand, potentially pushing up he Nvidia stock price in years to come.

Then again, perhaps once the initial excitement has waned, AI demand will fall sharply. Or maybe competitors will eat Nvidiaâs breakfast by offering much cheaper chips. Nvidiaâs proprietary designs, outstanding chip performance and expertise give it some protection against this, but not necessarily enough especially for price-conscious customers.

I do not think the current Nvidia stock price, at 46 times earnings, offers me sufficient margin of safety for such risks.

So, although I like the business, I will not be investing for now.

The post How much would Â£5,000 put into Nvidia stock 5 years ago be worth now? appeared first on The Motley Fool UK.

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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.