It’s down 8% this month, so should I buy Nvidia for my Stocks and Shares ISA?

Jon Smith explains why adding Nvidia shares as a growth option makes sense for his Stocks and Shares ISA, but thinks about some risks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: NVIDIA

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.

So far in September, the Nvidia (NASDAQ:NVDA) share price has been under pressure. It’s true that even with the 8% move lower, the stock’s still up 142% over the past year. However, such a dip could represent a great buying opportunity for me, especially if bought within my Stocks and Shares ISA. Here’s why I’m mulling it over.

The question around growth

One of the main benefits of me investing via my ISA is that I don’t have to pay capital gains tax (CGT) when selling a share. As such, buying a stock that I think has high growth potential and including it in my ISA makes sense. Even if the share price doubles in value, I’ll be able to enjoy all of that profit myself without some of it being eaten away by tax.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Should you invest £1,000 in Nvidia right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Nvidia made the list?

See the 6 stocks

So buying a growth stock like Nvidia makes sense from that angle. However, I then have to turn to think about whether the company has further growth potential. After all, just because it’s jumped 142% in the past year doesn’t mean that it’ll do the same thing for the next year.

This is probably the biggest risk I see right now. The company has a market-cap of $2.6trn, making it the third most valuable stock in the world. It’s tricky to see how this could grow by several more trillion. Put another way, Nvidia’s already so large that it makes it difficult to see how it can sustain the growth rate from the past (when it was smaller).

Created with Highcharts 11.4.3Nvidia PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Reasons for optimism

Nvidia fans would likely make the argument that the firm’s still experiencing high demand for the products. With reference to the names of different popular chips, the CEO commented at the latest quarterly earnings that “Hopper demand remains strong, and the anticipation for Blackwell is incredible.”

As such, there’s clearly a huge market that Nvidia can service, one that it’s nowhere near fulfilling at the moment. It’s impossible to put a figure on the size of this market, but certainly there’s scope for the firm to grow.

Another factor that could help the stock outperform is the continuous development of new products. One reason why companies like Apple do so well is the upgrades and add-ons of popular hardware. Nvidia’s working on doing the same, such as with the new, more powerful Blackwell superchip. There will be updated chips in the future too, creating additional sources of revenue for the brand.

Buying the dip

If you asked me a year ago whether I’d buy the stock if it fell by around 10%, I would have said yes. Right now, I’m still saying yes, but with much less conviction. I’m likely going to buy a small amount of the stock within the next couple of weeks. The overall sentiment around the outlook for the company’s still very good. Yet given the extent of the rally over the long term, I’m not investing a lot as I feel further gains could be more limited.

Should you buy Nvidia shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

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.

Jon Smith has positions in Apple. The Motley Fool UK has recommended Apple 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.

More on US Stock

Investing Articles

2 ‘safe-haven’ defensive shares to consider buying as tariffs hammer the stock market

Inflation fears are sending the prices of shares down, creating potential buying opportunities for investors. But which ones are likely…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Forecast: here’s how far the S&P 500 could crash in 2025

S&P 500 stocks are getting sold off as investors panic over economic uncertainty. But how far could the index fall?…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »

Investing Articles

Tesla shares plummet 50% in 4 months! Is it one of the best stocks to buy now?

Weaker-than-expected vehicle deliveries have continued Tesla's freefall, but is this volatility turning it into one of the best stocks to…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Investing Articles

I just bought this legendary S&P 500 tech stock for my ISA, 27% off its highs

This S&P 500 stock has tanked over the last month and Edward Sheldon has snapped it up for his portfolio…

Read more »

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »