Nvidia (NASDAQ:NVDA) stock recent got more affordable, following a 10-for-1 stock split. At the time of writing (12 June), a single Nvidia share is worth $120. That’s down from $1,200 at the end of last week when there was only 10% of the current share count.
This means Nvidia stock is much more accessible for ordinary investors who may not be able to afford to pay $1,200 for a single share. However, the sad truth is that we could have picked up Nvidia stock a lot cheaper just a few years ago.
Investing when CUDA was released
Today, however, I’m looking a little further back. On 23 June 2007, Nvidia launched a programme called CUDA (Compute Unified Device Architecture). It’s essentially a software platform that allows users to access the virtual instructions of Graphics Processing Units (GPUs).
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Nvidia’s GPUs were originally designed for graphics rendering, but CUDA meant that GPUs could be used for other tasks. And it turns out that GPUs had a huge amount of parallel computing capacity, with widespread use in the sciences and eventually artificial intelligence.
So, what was the price of an Nvidia share when CUDA was launched? Well, taking into account the recent stock split, the value of each share in June 2007 was just $0.69.
In June 2007, £1,000 was actually worth $2,000. With the stock exploding 17,291% since then, a $2,000 investment would be worth $347,826 today. That’s £272,504 at today’s exchange rate.
It’s one of those crazy growth stories that probably makes most of us say “if only“.
Too late to buy?
Analysts have been debating at many points over the last 18 months as to whether Nvidia stock is a good buy or not. And, until now, the stock has proven doubters wrong.
Personally, having been very bullish, I’m more cautious now. Starting with the valuation metrics, Nvidia is currently trading at 44.6 times forward earnings and with a price-to-earnings growth (PEG) ratio of 1.41.
Typically a PEG ratio above one suggests a stock could be overvalued, but that’s been up for debate in recent years. Many investors are happy to invest in any stock with a PEG ratio under 1.5, especially if growth is supported by long-term trends.
So, it’s expensive, but many investors believe Nvidia will keep delivering over the next decade.
From a business perspective, Nvidia has 95% share of the data centre GPU market, and around 80% of the AI accelerator market. These are huge, growing markets, which may one day account for more than a trillion dollars of spending in a single year.
The concern is, however, that Nvidia might be priced for perfection. Some analysts have suggested hyperscale and data centre companies are front-loading their spending on GPUs and chipsets. This suggests demand could slow down in the coming years.
Personally, I still believe in Nvidia stock. It’s expensive, but it’s the kingpin of the AI revolution. I’m up 149% on Nvidia so far, but may buy more for the long run.
