There’s no denying that Nvidia (NASDAQ: NVDA) has been an absolute belter of a share. Nvidia stock has soared. The chip company has become the world’s most valuable listed company on the back of huge demand created by customers’ investment in AI.
Still, it takes less than a couple of hundred pounds to get in on the action now. Should I do it?
A small stake in a massive story
Nvidia is traded on NASDAQ, a US stock market. Its price is quoted in dollars and the current sterling equivalent is around £134.
So, £1,000 would be enough to buy seven shares in Nvidia. That might not sound like a lot. Indeed, Nvidia has over 24bn shares outstanding at the moment, so £1,000 would buy only a tiny fraction of the chip behemoth.
But actually that is something I appreciate about the opportunities the stock market offers me. Even on a modest budget, I can invest directly in a huge tech company.
By contrast, that is not true for an unlisted firm like SpaceX (although I could gain indirect exposure to it by buying shares in an investment vehicle that in turn owns a stake, such as Scottish Mortgage Investment Trust).
Seven shares now — could a split mean more in future?
If Nvidia keeps growing in value, it may split its stock in future, so a holding of just seven today could end up being numerically bigger in future (though not necessarily a proportionately larger stake in the company).
It has already done that quite a few times, most recently in 2024.
A company typically splits stock to make the price more accessible. If Nvidia had not done that, its price today would likely be well above £1,000, so an investor with that much would not be able to buy even one share in the company.
Great track record, what might lie ahead?
Over the past 10 years, the price of Nvidia stock has grown around 220 times. Each $1,000 invested back then should now be worth around $220,000!
But as we often hear when investing (and rightly so), past performance is not necessarily an indication of what to expect in future.
The past decade has seen surging AI demand taking Nvidia sales to a level few investors would have dared to dream of 10 years ago.
I see a risk that that could be a one-off, meaning sales might fall again once the initial rounds of installations are complete.
If they do not, that could create a further risk: rivals developing lower cost alternatives to Nvidia’s products. Even with less functionality, at a cheap enough price that could tempt some clients away.
I’m tempted, but the price isn’t right
At the current price – 37 times earnings – I do not think that risk is properly reflected. So, for now, I will not be investing.
Still, if Nvidia keeps doing well and navigates the risks, I could see it soaring in the coming decade again. It has a large client base and proprietary technology, giving it strong pricing power. If that happens, the share could be worth many times what it is today.
So, I will keep an eye on it, hoping for a moment when the price offer me a risk-to-reward ratio I feel is more acceptable than now.
