I’ve owned Nvidia (NASDAQ:NVDA) stock for around two and a half years now. And so far, it has been a brilliant investment for me.
I just wish I had invested in the company earlier. Had I invested £5k in the chip designer 10 years ago, I’d now have a life-changing amount of money.
A phenomenal long-term investment
10 years ago, Nvidia shares were changing hands for around $4.60 (when stock splits are accounted for). At that time, the GBP/USD exchange rate was about 1.67.
This means that I would have got around 1,815 shares for £5k (ignoring trading commissions and FX fees).
Today, however, the shares are trading at $791. Meanwhile, the GBP/USD FX rate is now 1.26.
This means that in GBP terms, my £5k Nvidia investment would now be worth a staggering £1.14m.
Finding the next Nvidia
Now, I’m not going to be too harsh on myself for failing to spot the opportunity here a decade ago.
After all, Nvidia was a very different company back then – it was mainly a video gaming hardware company.
But I think there are some key takeaways here from a wealth-building perspective.
First, it can pay to allocate a bit of one’s capital to smaller technology companies. While Nvidia is a $2trn company today, 10 years ago it was a fraction of this size. Believe it or not, a decade ago, its market cap was only around $10bn. Generally speaking, the smaller a company is, the easier it is for it to double in size.
Secondly, it can be smart to allocate some capital to international stocks. While the UK stock market has had some big winners over the last decade, I’d be surprised if any stocks on the London Stock Exchange have turned a £5k investment into £1m or more over this period.
Third, backing highly driven, visionary founders and CEOs can pay off. Nvidia is led by founder and CEO Jensen Huang. And over the last decade, he has done an extraordinary job in terms of positioning the company to capitalise on high-growth areas of technology such as data centres and artificial intelligence.
Finally, when investing in growth stocks like this, it can pay to take a long-term view and ride out volatility. Nvidia has always been a highly volatile stock. Even since I’ve owned it, it has experienced a crash of around 65%. Yet by sticking with the stock for the long term, one could have done very well. As my calculations above show, a long-term investor here could have potentially generated life-changing gains.
Better stocks to buy today?
As for the outlook for Nvidia today, I remain bullish, taking a long-term view. I think the company is very well positioned in today’s digital world.
However, after its huge run over the last year (+240%), I’m not in a rush to buy more shares. I think a lot of good news is priced in to the stock right now. If we were to see some bad news (e.g. a slowdown in AI-chip demand or new export restrictions), we could be looking at a sharp pullback.
All things considered, I see better opportunities in the market for my money today.
