I’m a long-term investor. Flipping stocks on a day-to-day basis isn’t something I go in for. Investors with this kind of mindset sometimes miss out on short-term gains. Yet being patient and holding a stock can really pay off. For example, if an investor had put £2k in Nvidia (NASDAQ:NVDA) stock a couple of years back, here’s what it would be worth now.
Exceptional gains
Exactly two years ago, Nvidia shares were trading just above $21. The current price reflects a 510% jump over the period in question. That means the £2k would be currently worth £12.2k. It’s very impressive to think that an investment that size could turn into a five-figure sum in just the space of a couple of years.
Granted, Nvidia has been at the forefront of the AI boom over this time period. The outperformance of this sector alone can be observed when comparing the return to the S&P 500 at a broader level. The index is up 47.3%, which is a profit to be happy about. Yet the stark difference between that and Nvidia really shows the extent of the rally in the individual stock.
Another barometer to compare the return is to assess it against the Magnificent 7. This group of stocks have been the darlings of the market. Besides Nvidia, the group is Tesla, Microsoft, Apple, Amazon, Meta, and Alphabet. Over the past two years, it’s up 262%.
So even with this comparison, Nvidia still stands head and shoulders above the rest.
Digging deeper
The main reason for the gains has come from the explosive AI boom. The competitive edge that the business has, along with the ability to sell AI chips at premium prices, has helped to fuel revenue and profit growth. Demand for AI training skyrocketed with the rise of ChatGPT and generative AI, fueling orders for Nvidia’s high-performance H100 and A100 chips.
It’s worth adding that some of the rally is also down to retail investor speculation. The hype around the company is real, meaning that for many retail investors, it’s the obvious place to turn to if they want to get exposure to AI as a theme.
Looking forward, I don’t think the party is over, but I do see risks ahead. The rise of DeepSeek in recent weeks shows that the AI space is becoming increasingly competitive and at a lower price level. Even though this might not be a bad thing in the long term for Nvidia, it could spook some investors in the short term.
Another risk is that Nvidia’s first-mover advantage in the past two years was unique, and the share price performance reflects that. I struggle to see how the next two years can replicate that, as the pace of innovation and adoption is unlikely to be the same.
The lay of the land
The bottom line is that any investor who owned Nvidia shares over this time period has done exceptionally well. Although I wouldn’t sell my stock if I owned it, I’m not inclined to buy it currently as I feel there are better AI options out there.
