Oh, Nvidia (NASDAQ: NVDA), Nvidia. The name alone sounds a bit like envy – and invidious. It is understandable that people who do not own Nvidia stock (myself included) may feel a bit envious at least (though hopefully not invidious!). After all, it is up 72% in the past year alone.
Over the longer term, the chip giant has performed even better. In just five years, Nvidia stock has leapt up 1,514%.
Over a decade, 31,614%. Yes, you read that correctly: 31,614%!
Incredibly, though, I think that it could move even higher from here. History is history and that 31,614% gain over the past decade is now a thing of the past.
Today, looking forward, might it make sense for me to add Nvidia stock to my portfolio?
Lots still to play for
I think it could.
In the 1940s, the then president of IBM was reputed to have said, “I think there is a world market for about five computers”.
Why?
At that point, computers were expensive, complex items with very specific uses for a small number of governmental or commercial clients who were able to afford the huge sums involved.
Looked at another way, that sounds a bit like the current AI landscape. Billions of pounds are being spent on AI chips – but not by me, or my neighbour, or the chippie down the road.
For now, we are in the gold rush phase as companies like Alphabet and Meta pile into AI, spending tens of billions of dollars collectively on AI infrastructure.
That is good news for Nvidia, as its proprietary chip designs, large client base, and deep customer relationships are helping it to turn that demand into profits. In its most recent quarter, Nvidia reported net income of $20bn.
But what if, like computers in the 1940s, that is just the start?
Nvidia has already seen sales (and earnings) grow exponentially. If AI chip demand stays strong at the corporate level but starts to spread more widely, I think we may still be fairly near the beginning of Nvidia’s long-term growth story, like IBM in the 1940s.
I’m very tempted – but holding out
In that case, Nvidia stock could still be a bargain even after its incredible performance over the past few years.
That makes me enthusiastic about investing. I reckon there could still be potentially huge rewards ahead.
But as an investor, I need to consider risk as well as reward.
Earnings at Nvidia have soared, but the stock’s price-to-earnings ratio is still a punchy 59. That is too high for my comfort level.
The ultimate size of the AI prize remains to be seen. After the initial chip installations, demand could wane.
Meanwhile, Nvidia faces challenges from shifting tariff regimes to growing competition. So, at the current price, I will hold off buying Nvidia stock for now.
