Nvidia Stock’s a Grower. Just Look At Its 100,000% Return

Editor’s note: This is part 10 of a 13-part series about companies whose shares have amassed 100,000% returns for investors and the path taken to generate such impressive gains over the long term. See below for links to the other stocks in this series.

The AI boom occurring right now may be more transformational than the internet boom that occurred at the turn of this century.

While the emergence of the internet was truly transformational, the age was ushered in with a bubble that was catastrophic when it burst. I suspect that something similar may occur with AI, but Nvidia (NVDA) investors will not be among the collateral damage.

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There is a caveat here. Long-term owners of Nvidia have already experienced extreme volatility in their holdings. Between November of 2021 and September of 2022, shares of Nvidia fell by nearly two-thirds.

And it wasn’t the first time Nvidia shares took a perilous dip. Between August 2018 and the end of that year, Nvidia shares fell by 50%. This could happen again. Markets get twitchy, and when they do anything is possible.

But as we go to press, NVDA is our largest holding, and I expect it will remain so for the foreseeable future. This is because Nvidia has a lock on the semiconductor chips that drive AI and there are no signs that its grip will loosen.

If anything, as the summer of 2024 came to a close, NVDA’s grip strengthened with the release of its Blackwell GB200 graphic processing units. Notably, Blackwell is the third generation of AI chips from Nvidia, following the Hopper and Lovelace releases.

There are other chipmakers of course, but for now, they have been relegated to lower-grade chip sets for lower-grade AI applications.

Evidence that the competitors may never close the gap on Nvidia surfaces in the amounts that Intel (INTC) and Advanced Micro Devices (AMD) are now spending on research and development to catch up.

Advanced Micro Devices’ research and development expenses were 25.9% of revenues in 2023. At Intel, it’s even higher with total research and development expenses at 29.6% of 2023 revenues.

But it’s not as if NVDA is sitting still while others play catch up. Even with its “lighter” R&D expense of 14.2% of revenues for fiscal 2023, Nvidia expects to upgrade its flagship AI chipset every year until the end of the decade.

The potential of being an undisputed leader in an industry that will indisputably mushroom is one reason Nvidia stock has increased by over 1,000% from the fall of 2022 midway into 2024.

But that’s potential. Over time, the growth in AI needs to materialize and Nvidia must replace the return predicated on potential with a solid fundamental performance.

But this is another part of the story that makes NVDA compelling. This is a company that has already and unequivocally demonstrated that it knows how to make money.

Before AI consumed the potential of the company, NVDA was focused on advanced semiconductor chips for a number of end markets including automotive, robotics and data centers.

Nvidia was also dominant in the graphics market for gaming and industrial applications.

And for the years before AI’s dominance over the future of the company, say 2022, Nvidia earned $9.7 billion on revenues of $26.9 billion. Further, in just two years, Nvidia grew total revenues to $60.9 billion and earned $33.8 billion, for an unheard-of net margin of close to 50%.

Yes, NVDA has always been a grower. From earnings per share of just 1 cent in 2005, the company reported earnings per share of $1.21 for its fiscal year 2023. That represents an average annual growth of 27.1% per year.

All this for a company that is just 32 years old. If it can generate a 272,000% return in that short span, imagine what it might do over the next 32 years.

Note: This content first appeared in Louis Navellier’s latest book, The Sacred Truths of Investing: Finding Growth Stocks that Will Make You Rich, which was published by John Wiley & Sons, Inc.