If I’d invested £1,000 in Nvidia stock 3 years ago, here’s what I’d have now

AI hype has caused Nvidia stock to skyrocket in the last three years. How much would a £1,000 stake in the chipmaker be worth now?

| 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.

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.

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.

In the last few years, some of the most exceptional stock market returns have come from US tech companies. The latest big winner is Nvidia (NASDAQ: NVDA) stock. The California-based chipmaker has had a truly outrageous three years. 

730% returns

Let’s say I invested £1,000 into Nvidia stock three years ago. How would I have got on?

Well, if I’d invested in June 2020, my stock would have risen 366%. So my £1,000 stake would have increased to £4,660. And if I’d bought the Covid dip in March 2020, I’d have seen a 730% increase. That would have meant my £1,000 stake increasing to £8,300.

Should you invest £1,000 in Hurricane Energy Plc 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 Hurricane Energy Plc made the list?

See the 6 stocks

Created with Highcharts 11.4.3Nvidia PriceZoom1M3M6MYTD1Y5Y10YALL18 Mar 202023 Jun 2023Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23202120212022202220232023www.fool.co.uk

These returns look even crazier in context. The S&P 500 is up 40% in the last three years and the FTSE 100 is up only 23%. Even if we only look at the US tech sector, that’s up only 47%. Simply, Nvidia has been on an absolute tear. 

Sadly, I missed out on the gains here. And as I don’t have access to a time machine, the important issue for me now is whether this stock is still a buy today.

What happened?

While the last three years have been terrific, it’s not been all smooth sailing. Last October, Nvidia shares were down 65% in about a year as the tech sector struggled with rising interest rates. 

Then, Chat-GPT was released and took the world by storm. The hype around AI became intense (almost unbearable if you ask me). And investors flocked to Nvidia, hoping to own shares in one of the key players of the ‘AI revolution’. 

But this misses what I think is the real story here, which is the chipmaker’s enormous competitive advantage. Its $10,000 A1 chips were the best in their class. Now, they’re used for 95% of machine learning. 

Sure, AI has been a huge catalyst for the firm. But without the economic moat of being the best chipmaker, none of these returns could have happened. 

Is it a buy?

The long and short of it is that I like Nvidia stock. It’s a great company with great products. The only problem is that AI hype has driven up the price. 

Now, it trades at 39 times forward earnings. Put another way, it will take 39 years of profits to make back the market cap. This means it’s an expensive buy, and that adds risk. Compare it to the S&P 500 average of 22, or even other tech firms like Apple (31) or Alphabet (27). 

Another problem I have is that expected earnings seem optimistic. The company projects $11bn next quarter after $7bn for the quarter just gone. A miss here and the price will seem even dearer. 

For Nvidia to be a buy I’d need to see a better entry point. Perhaps the hype around AI will die down soon? If so, I’d consider picking up some shares. As it is, I’ll be keeping my powder dry for now.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

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.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, 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 Investing Articles

Young female business analyst looking at a graph chart while working from home
Investing Articles

After collapsing 28% today, are Bunzl shares too cheap to ignore?

A poor trading statement has sent Bunzl shares to multi-year lows. Could now be a good time to consider investing…

Read more »

Investing Articles

These 5 stocks could earn £1,600 of annual passive income in a £20,000 ISA

Harvey Jones shows how to generate a high and rising passive income by buying a balanced mix of high-yielding FTSE…

Read more »

Young woman holding up three fingers
Investing Articles

3 things I like about Greggs shares

Greggs shares have tumbled by more than a third over the past year. But this writer has no plan to…

Read more »

artificial intelligence investing algorithms
Investing Articles

Nvidia stock: beware the bear market rally

Andrew Mackie argues that investors should tread carefully before investing in Nvidia stock, as the worst of the sell-off could…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Up 73% in one year, is this the best value stock in the FTSE 100?

A brilliant run of form suggests this FTSE 100 giant should no longer make the cut as a value stock.…

Read more »

Investing Articles

The best could yet be to come for UK shares! I’m buying these ones

Amid ongoing stock market turbulence, this writer's been adding selected UK shares to his portfolio. Here's why and what he…

Read more »

Top Stocks

4 UK stocks trading well below book value to consider buying

Sometimes, it pays to be contrarian: who says the UK market has priced a stock precisely right, anyway?

Read more »

Investing Articles

The S&P 500’s 12% off its highs. Is now a good time to buy US shares for an ISA?

Right now, a lot of British investors are wondering whether it’s a good time to buy US shares. Here, Edward…

Read more »