Nvidia stock has surged 3,450%. This UK investment trust owns loads!

Nvidia’s recent amazing price surge has helped boost the value of this investment trust too as the chipmaker is its biggest holding.

| More on:
Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Nvidia‘s (NASDAQ: NVDA) performance over recent years has been incredible. Since the start of 2024, the chipmaker has soared 167%. Over five years, the gain has been an astonishing 3,450%. That is good news for shareholders in one Edinburgh-based investment trust. Nvidia is the single biggest holding in its portfolio, accounting for 8.8% of its total value.

Step forward Scottish Mortgage Investment Trust (LSE: SMT).

The trust is no stranger to engaging tech growth stories, having been an early and long-term investor in Tesla. It has reduced its Tesla holding but the carmaker is still one of its top 10 holdings.

Proven strategy strikes again

The Scottish Mortgage share price has shot up 73% over the past five years. That reflects some uneven performance though. While it has been moving broadly upwards over the past year or so, it remains far below its 2021 peak.

As it publishes the net asset value of its portfolio on a daily basis, investors (or indeed anyone) can see what each share should be worth (on paper, at least) if the trust liquidated its assets. The shares currently sell at a discount to their net asset value.

The longer-term value swings have reflected the ups and downs of the tech boom. As Scottish Mortgage has focused heavily on this sector, declines in shares like Tesla have hurt its valuation.

On the plus side though, surging prices for current tech sector darlings like Nvidia have helped support an increasing valuation for Scottish Mortgage shares.

Potential for further gain

Nvidia is not the only exposure Scottish Mortgage has to the booming chipmaker sector. In fact, its third largest holding is another chip manufacturer, ASML.

There is a risk if chipmaker share prices fall, for example because the initial surge of AI-linked customer orders is not sustained. That could hurt the value of both Nvidia and ASML. That would also likely hit the Scottish Mortgage share price.

But the investment trust is diversified across dozens of different companies, from Ferrari to Netflix. The two soaring chipmakers account for just under 16% of the overall portfolio.

With a range of holdings in other tech firms, alongside investments in sectors from pharma to luxury goods, I think Scottish Mortgage could perform strongly in years to come if its asset managers have bought into the right firms at the right prices.

I’d happily buy

Scottish Mortgage started investing in Nvidia in 2016. It may have altered its stake since then, but it ought to have seen substantial benefit from owning the shares at a point when the chipmaker took off.

The investment approach of buying into promising tech companies and then holding them for the long term has been a successful one for Scottish Mortgage.

There is a danger that it overpays, as has been the case for some of its past holdings. That could hurt the share price.

On balance though, I continue to like the investment trust’s strategy and would happily buy its shares today if I had spare cash to invest.

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.

C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML, Nvidia, and Tesla. 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.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Are BT shares still a bargain after climbing 30%?

BT shares are finally showing signs of life after years in the doldrums. Harvey Jones thinks this may point to…

Read more »

Investing Articles

£10k in an ISA? Here’s how I’d aim to generate a ton of passive income

I dream of escaping the shackles of a salary with financial independence and a steady stream of passive income. Here’s…

Read more »

Investing Articles

Are Burberry shares a bargain or a value trap?

Appearances can be misleading in the stock market. Shares that look like a bargain can turn out to be a…

Read more »

Investing Articles

How I’d target £17,673 passive income with just £100 a week

Our Foolish writer explains how he’d build a portfolio capable of generating a life-changing passive income with limited capital.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

If I’d put £20k into a FTSE All-Share tracker fund 10 years ago, here’s what I’d have now

A lot of UK investors have money in FTSE All-Share tracker funds. Here, Edward Sheldon looks at how these products…

Read more »

Investing Articles

How I’d invest £10k in a SIPP to target £28,000 annual passive income

Investing just £10k today in a SIPP could be the key to a chunky retirement income in the long run.…

Read more »

Investing Articles

How I could earn a second income worth £35,000

Millions of us invest for a second income. Our writer explains how he's making it work and shares tips for…

Read more »

Investing Articles

3 ways Labour could impact the Rolls-Royce share price

Labour have swept to power on a pro-worker, pro-business ticket. But how could the new government influence the Rolls-Royce share…

Read more »