On 3 February, Nvidia (NASDAQ:NVDA) stock closed at $116.66. At the time of writing (after the market closed on 17 February) it’s at $138.85. That’s up 19%, enough to turn £10,000 into £11,900 in just two weeks
It might seem like chickenfeed compared to the 88% gain of the past 12 months. Or 1,816% over five years. But there’s another way to think about it that might cause an intake of breath. In this short period, Nvidia’s market capitalisation has risen by around half a trillion dollars.
Am I saying we should get in quick and bag the next fortnight’s profit? No. In fact, these recent gains haven’t quite made up for the dip that followed the release of China’s DeepSeek artificial intelligence (AI) model.
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What does it mean?
What do these price movements really mean for investors thinking of buying Nvidia? For one thing, I think it all means we need to check the tensile strength of our nerves.
I sure wouldn’t rate it a ‘widows and orphans’ investment. And I wouldn’t consider buying unless I knew I could handle the volatility. Even then it would only be a level of money where the size of the risk wouldn’t keep me awake at night.
There’s big short-term risk here, and I think £10k invested today could be worth a fair bit less in another fortnight. Or more. It’s anybody’s guess.
I really am considering buying Nvidia shares however. And if I do, it’ll be because I think they’re underpriced compared to their long-term potential.
AI on the cheap?
DeepSeek shocked us with its cheap price. It works on older-generation Nvidia chips, because US export restrictions prevent Chinese developers getting newer ones. And it allegedly cost less than $6m to train, though many doubt that’s accurate and cheating allegations have emerged.
All those billions that the Magnificent 7 AI stocks were going to pump into AI development? Including the huge sums likely to be headed Nvidia’s way? Maybe it won’t be needed after all, and maybe AI’s going to be as cheap as old chips.
But as earnings reports roll in, we see the opposite. Amazon said it plans to plough $100bn into capital expenditure in 2025, up from $83m last year. Microsoft has $80bn earmarked for AI investment, and Meta‘s not far behind on $65bn.
Thanks DeepSeek!
I’m starting to think DeepSeek might have done Nvidia a favour. It looks like Chinese competition is increasing the urgency of AI research and development in the US. And it all needs even more chips.
Even though Nvidia stock has skyrocketed, I still don’t see it as overpriced. Forecasts put the price-to-earnings (P/E) ratio at about 50 for 2025, which maybe does look a bit spicy. But they expect earnings growth to drive it down to a very palatable 26 by 2027.
Think long-term thoughts
This business is changing rapidly, with news seeming to come almost daily. But whatever happens, I’d urge investors to remember that a fortnight in the market rarely means much. I’ve not made up my mind yet so for me, Nvidia will either be a long-term Buy, or I won’t buy at all!
