Up 20,000% in 10 years, has Nvidia stock run its course?

Nvidia stock has proved itself an incredible investment over the last 10 years. But is there any more value left in its share price?

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Image source: NVIDIA

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Nvidia (NASDAQ: NVDA) is one of the most impressive stocks on the market right now.

In the last decade, its share price has climbed an incredible 20,067.1%. That puts it as one of the best-performing stocks during that period.

Zooming in, Nvidia’s performance has been very strong too. In the last 12 months, it has risen 210.6%. This year alone it’s up 88% compared to 9.4% for the S&P 500.

But with its share price growing so much over the last decade, investors may be apprehensive about investing in the stock. As a potential investor, I always want to make sure that I don’t take on risks that I’m not comfortable with.

Bearing that in mind, has Nvidia’s fast price growth run its course?

Valuation

Whether Nvidia stock is overpriced is partly down to personal opinion. But I want to look at its fundamentals to gauge this, starting with its price-to-earnings (P/E) ratio. For Nvidia, this sits at nearly 76. As we can see, that’s higher than any of the remaining Magnificent Seven. The closest is Amazon, with a P/E of around 53. To me, that means Nvidia looks overpriced.


Created at TradingView

Comparing its price-to-sales (P/S) ratio reveals a similar scenario. Nvidia’s P/S is around 37. Again, that’s higher than all of its peers.


Created at TradingView

Risks of a bubble

Based on the above, I don’t see much value in Nvidia at the moment. In fact, I’m conscious we could see its share price pulled back soon.

That’s because some market spectators think the stock is in a bubble. Investors have been buying into the hype surrounding it, but that comes with risk. With lots of attention comes the threat of large amounts of volatility.

Future growth

The flip side to this is the argument that the hype is justified. Given Nvidia’s impressive growth, it’s hard to disagree with that.

Last year revenue rose 126% to $60.9bn. By 2025, its predicted revenue will top $110bn.

As such, on Tuesday (7 May) Goldman Sachs maintained a Buy rating on Nvidia and hiked its 12-month target price from $1,000 to $1,100.

For the period between 2025 to 2027, the broker raised its earnings forecast for the chipmaker by 8% on average per year. It said Nvidia’s data centre will be a key driver for the company, predicting strong revenue growth for the remainder of the year.

The investment bank also believes that artificial intelligence (AI) spending is likely to continue this year and beyond as demand keeps steadily rising. That’s music to the ears of Nvidia shareholders.

My move

I already own the shares, so I’m not looking to increase my holdings. But even if I didn’t, I don’t see the stock as an attractive investment opportunity right now.

I’m bullish on Nvidia in the long run. That said, I’m cautious we could see its share price recoil at the first sign of any slowdown. At that point, maybe I’d consider buying some more shares.

Nevertheless, I want to increase my exposure to AI, and I think there are plenty of opportunities out there.

I have a few companies on my watchlist that I’ll be delving into for further research before I consider Nvidia.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Keough has positions in Nvidia. The Motley Fool UK has recommended Amazon and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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