Nvidia (LSE: NVDA) shares are up 22,793% in the last decade. This meteoric rise – which turned every £4,368 into £1m – was helped along by many factors, but one turning point was when the first AI chatbot ChatGPT emerged.
ChatGPT was released on 30 November 2022 and the Nvidia share price closed the day at $156.
Curiously, there was plenty of time for investors who saw the potential to get involved. The share price even drooped as low as $138 through December. It rocketed soon after as ChatGPT and the artificial intelligence (AI) hype train picked up steam. It now sits at $909.
Takeaways
If I’d invested £5,000 in Nvidia shares when ChatGPT was released, I’d now have £29,135. Not bad.
My first takeaway here is how long it took Nvidia shares to start surging – they hadn’t even risen 10% three months after ChatGPT was released.
I remember the early days of ChatGPT well, and while the chatbot had (and still has) its flaws, it definitely felt like something with limitless potential.
It’s easy to say in hindsight, but it does seem like the markets weren’t perfectly efficient and who knows what similar opportunities there are today.
My second takeaway is why did Nvidia outshone its rivals? Nvidia went up 483% while fellow chipmakers AMD (up 159%) and Intel (up 46%) limped behind.
This wasn’t simply the sector surging. Nvidia was the best of the bunch and has the gains to show for it.
Credit earned
Much credit for Nvidia’s success must go to Jensen Huang, its co-founder and CEO. I’m a fan of founder-led companies in general. I mean, who isn’t? You’ve got someone in charge who’s thinking further ahead than the next quarterly earnings call.
But Huang in particular has shown incredible foresight. He’s been working with universities for decades to maximise the use cases for Nvidia’s GPUs. This is partly why it cornered the market (94% market share) for the high-performance chips needed for AI.
His leadership has been so impressive that I’m tempted to buy the shares, even though I’m exposed to Nvidia already through its portion of index funds.
Remember, Nvidia is a $2trn company now. The stock has a 4% index weighting for S&P 500 funds and a 3% index weighting for the MSCI Global Index!
My move
Am I buying? Well, at $900, the shares do look a little toppy. Nvidia trades at 37 times forward earnings, which doesn’t sound expensive, but it’s on the back of record orders and bumper margins.
If the rapid growth of the last few quarters eases then we could easily see a pullback in the share price.
The stock will certainly remain on my watchlist as I wait for a more attractive entry price.
