HomeMarket NewsCan Investing in Nvidia Stock Lead You to Wealth?

Can Investing in Nvidia Stock Lead You to Wealth?

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Nvidia (NASDAQ: NVDA) has emerged as one of the most remarkable wealth-builders in recent investment history. An investment of $10,000 in Nvidia five years ago would now exceed $275,000, significantly boosting many investors’ journeys toward millionaire status.

While we cannot turn back time to invest at those levels, we can look to the future. The critical question remains: Can investing in Nvidia stock today lead you to millionaire status?

Nvidia: A Power Player in AI Innovation and Investment

Capitalizing on the AI Boom

Nvidia’s phenomenal growth is linked directly to the surge in artificial intelligence (AI). The company’s primary product, the graphics processing unit (GPU), plays a crucial role in training AI models. GPUs can handle multiple calculations simultaneously and can be clustered for enhanced computing power. When thousands of GPUs operate together, they reach a capability that allows efficient training of advanced AI models.

As businesses strive to enhance their computing power, Nvidia’s sales of GPUs have skyrocketed, driving revenue growth at an unprecedented rate.

NVDA Revenue (TTM) Chart

NVDA Revenue (TTM) data by YCharts

As a result of this tremendous growth, Nvidia has delivered substantial stock returns, solidifying its place as one of the most valuable stocks to own in recent years.

That said, what can we expect from Nvidia moving forward?

High Expectations Amidst High Prices

While Nvidia has shown exceptional performance, expectations for the next five years should be tempered. The company has rapidly ascended to become the second-largest publicly traded firm globally, closing in on Apple for the top position.

For the stock price to double (or even triple), Nvidia would have to reach unprecedented highs. Therefore, investors must recalibrate their expectations.

A good investment goal for individuals is to aim for slightly better returns than the market, typically by one or two percentage points each year. This seemingly small difference can lead to significant gains over the long haul. For instance, consider an investor starting with $100,000 without any additional contributions over 30 years; the potential returns at various performance levels would be:

Return Level Final Value
10% $1.7 Million
11% $2.3 Million
12% $3 Million

While not everyone has a starting amount of $100,000, the principle remains valid: A few percentage points of additional return can significantly change outcomes. This perspective highlights that superior returns can shorten the time needed to achieve financial milestones, such as millionaire status.

Given that the long-term average return of the S&P 500 hovers around 10% annually, this is the benchmark Nvidia must surpass.

Can Nvidia manage to deliver a 12% annual return from this point? This seems plausible. The demand for Nvidia GPUs remains high, and Global Market Insights estimates the GPU market could be valued at $456 billion by 2032. Despite generating nearly $100 billion in revenue over the past year, Nvidia still commands a solid presence in the market with ample opportunities ahead.

Nonetheless, caution is warranted regarding Nvidia’s current valuation. On a price-to-earnings (P/E) basis, it is among the highest Nvidia has experienced this year.

NVDA PE Ratio Chart

NVDA PE Ratio data by YCharts

This may not be the ideal moment to buy in. However, patience often pays off, as Nvidia’s stock has historically dipped, making timing your investment critical for maximizing gains.

While Nvidia alone may not guarantee millionaire status, it could certainly support your journey as part of a diversified investment strategy.

A New Chance for Investors

Have you ever felt you missed out on investing in today’s leading stocks? This could be your opportunity.

Occasionally, our team of analysts highlights a “Double Down” stock recommendation for companies they believe are ready for significant growth. If you’ve been worried about losing your chance to invest, now could be the moment to act before it’s too late. The data shows compelling possibilities:

  • Amazon: A $1,000 investment when we issued a double down in 2010 would be worth $21,492 today!*
  • Apple: A similar investment in 2008 would be valued at $44,204!*
  • Netflix: Investing $1,000 in 2004 would have grown to $409,559!*

Currently, we are issuing “Double Down” alerts for three remarkable companies, and this may be one of your best chances.

Discover 3 “Double Down” stocks »

*Stock Advisor returns as of October 28, 2024

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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