It’s a tale as old as time – the one where an investor regrets selling off what later becomes a skyrocketing stock. In my case, it’s Nvidia (NASDAQ: NVDA). Over the past year, Nvidia’s stock has surged an astronomical 400%, leaving me remorseful about my decision to offload my shares last July. The regret is palpable, but is it now the time to mend my relationship with this tech giant? Here’s why I am seriously contemplating a reunion.
Nvidia’s Unparalleled Growth
At the epicenter of Nvidia’s success is its graphics processing units (GPUs). Originally designed for gaming graphics, these processors have transcended their initial purpose and are now indispensable for a myriad of complex computing tasks, ranging from drug discovery and engineering simulations to cryptocurrency mining and AI model training.
The company’s foray into artificial intelligence has been a game-changer, propelling its revenue to stratospheric heights. In the third quarter of fiscal 2024, Nvidia witnessed an astonishing 206% year-over-year surge, raking in a staggering $18.1 billion in revenue. And the momentum shows no signs of abating, with the management anticipating a more than threefold increase in fourth-quarter revenue to around $20 billion.
Growth of this magnitude at a company as considerable as Nvidia is a rare sight to behold, making this stock an extraordinary narrative. It recently trumped the likes of Amazon and Alphabet to become the third-largest U.S. company by market capitalization. With such a compelling story, it’s becoming increasingly challenging for me to ignore the allure of Nvidia’s stock.
The Pricy Conundrum
In hindsight, I realize my flawed judgement about Nvidia’s market potential. I had underestimated the perpetual demand for the company’s GPUs, presuming it would wane swiftly after an initial surge in AI-driven GPU demands. However, the actual scenario played out quite differently.
For instance, Tesla’s repeated investments in Nvidia’s GPUs have been eye-opening. Initially, I assumed their expenditure of $300 million on a Dojo computer powered by 10,000 H100 GPUs would be a one-off occurrence. To my surprise, Tesla announced an additional $500 million investment for a second Dojo computer at its Buffalo, NY plant, with plans for even more beyond that. This unexpected magnitude of demand has reshaped my perspective and fueled my desire to re-engage with this stock.
Precedence Research projects a monumental upsurge in the global GPU market, from $42 billion in 2022 to an estimated $773 billion by 2032. Given Nvidia’s formidable position with a trailing-12-month revenue of $45 billion, the company appears poised to capitalize on this momentous market expansion.
Yet, the question arises – is it truly the right time to do so, especially with the stock trading at nearly 100 times earnings? Although I missed the opportune moment to take this plunge, historical precedence demonstrates that latecomers to the likes of Amazon and Netflix still reaped substantial rewards. Nvidia appears poised to offer a similar window of opportunity, despite the intimidating price tag, which trades at nearly 100 times earnings. Yet, considering the analysts’ earnings projections over the next 12 months, the valuation seems much more reasonable, comparable to the 35 times forward earnings estimates for Microsoft.
While my initial position in Nvidia may be relatively modest, it will serve as a significant starting point, allowing me to closely monitor the company and ensure that I partake in the potential gains of what seems to be one of the most consequential companies of this decade. Although I missed the initial surge, the outlook indicates significant upside if the AI market fulfills its mammoth potential.
Should you invest $1,000 in Nvidia right now?
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Suzanne Frey, an executive at Alphabet, sits on The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, also sits on The Motley Fool’s board of directors. I hold positions in Alphabet, Amazon, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Netflix, Nvidia, and Tesla. Additionally, The Motley Fool advocates for the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool abides by 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.
