Buying solid firms and holding on to their shares for a very very very long time is a proven approach to generate profits throughout the stock market, as this straightforward strategy helps investors profit from the ability of compound growth and as well as capitalize on disruptive and secular growth opportunities.
Nvidia (NASDAQ: NVDA) is a chief example of what a successful buy-and-hold investment can deliver over the long run. An investor who put $10,000 into Nvidia stock a decade ago and held on could possibly be sitting on a position price greater than $1.8 million without delay and greater than $1.9 million with dividends reinvested.
But can Nvidia replicate this feat and help recent investors grow to be millionaires within the event that they begin with a $10,000 investment?
Is it realistic to expect such massive gains from Nvidia again?
Nvidia has grown by leaps and bounds over the past decade, and now, with a market cap of just over $2.25 trillion, it’s the third-largest company on the planet. So for Nvidia to grow by 100 times from here, its market cap would want to exceed $200 trillion. That appears absurd: Last 12 months, your entire global gross domestic product (GDP) was an estimated $105 trillion, up just 5% from 2022.
Nvidia’s market cap, subsequently, is resembling about 2% of the worldwide GDP. If it maintained that proportion over the long haul, it is going to be price $200 trillion when the world economy had grown to an almost incomprehensibly large $10 quadrillion. That won’t occur in our lifetime — global GDP has grown by between 2% and 5% a 12 months since 1980 in most years, except throughout the 2008-2009 recession and on the onset of the pandemic in 2020.
Assuming the worldwide economy grows at an optimistic 5% a 12 months, it is going to take greater than nine an extended time for it to grow to $10 quadrillion. We won’t know if Nvidia will even be around then. Nevertheless, going by the company’s prospects and the multiple markets that it serves with its graphics processing units (GPUs), there could also be an outstanding likelihood it could become a solid long-term bet — even when it’s unlikely to point out a $10,000 investment right right into a million-dollar position again in our lifetimes.
But when you’ve gotten got that much in investible money after covering your bills, paying off any high-interest debt you’ve gotten got, and construct up an emergency fund, putting $10,000 into Nvidia as a component of a diversified portfolio could indeed show you find out how to meet up with to your financial goals.
Multiple catalysts make Nvidia a solid long-term buy
As the following chart shows, Nvidia’s growth has taken off from the highest of 2022.
The company’s data center business has played a central role on this growth. It delivered a record $47.5 billion in revenue in its recently concluded fiscal 2024, which was a big 217% increase. The information center business produced 79% of Nvidia’s total revenue of $60.1 billion.
This business segment is moving the needle in a large way for Nvidia as customers are lining up to buy its strongest GPUs for artificial intelligence (AI) training and inference. From Alphabet to Amazon to Meta Platforms and lots of more, Nvidia has an illustrious list of shoppers for its flagship H100 processor. More importantly, it could possibly launch its next-generation H200 AI GPU soon, and demand for this chip is already high.
Nevertheless, this just isn’t the one GPU opportunity Nvidia is about to learn from. The company’s gaming business has also gained solid momentum and can generate billions of dollars in annual revenue for the company in the long term.
It’s price noting that Nvidia stays the dominant player on the market for every AI and PC GPUs. While its share of the discrete PC GPU market reportedly stands at greater than 80%, Wells Fargo recently estimated that it controls a whopping 98% of the AI GPU market. Precedence Research forecasts that the worldwide GPU market’s revenue will grow from $42 billion in 2022 to $773 billion in 2032, an annualized growth rate of virtually 34%. Given Nvidia’s market share now, its outstanding pace of growth looks sustainable.
More importantly, Nvidia is in search of to extend its reach beyond these two markets. As an illustration, it’s reportedly in search of to get into the custom AI chip market, a lucrative growth opportunity. Nevertheless, Nvidia’s expert visualization business is now growing at a robust pace as well.
The company generated $463 million in revenue throughout the expert visualization segment last quarter, a jump of 105% from the prior-year period. This segment includes the company’s Omniverse digital twin platform and graphics cards utilized in workstation PCs. For the entire fiscal 12 months, its expert visualization revenue was just $1.6 billion, so it continues to be a small segment for the company, but the possibility here is large, and the company has already began capitalizing on it.
As such, there are multiple reasons this semiconductor giant could proceed to grow at a healthy pace in the long run. This will also be evident from the company’s price/earnings-to-growth (PEG) ratio, which stands at just 0.12.
The PEG ratio is a forward-looking metric that’s calculated by dividing a company’s price-to-earnings ratio by the annual earnings growth it’s predicted to deliver, often over five years. A results of lower than 1 indicates that a stock is undervalued when put next to the expansion it could deliver.
So, investors in search of so as to add a possible long-term winner to their portfolios should consider buying Nvidia stock without delay, since it could help them of their quest to grow to be millionaires.
Do you’ve gotten to take a position $1,000 in Nvidia without delay?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Idiot’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of directors. Wells Fargo is an promoting partner of The Ascent, a Motley Idiot company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Idiot has a disclosure policy.
Could Nvidia Stock Help You Grow to be a Millionaire? was originally published by The Motley Idiot