The resurgence of stock splits has carved a new path into the investing world, rejuvenating a practice that was once the norm in the 1990s before fading into obscurity. Companies opting for stock splits after years of remarkable growth and robust financial performance have recently caught the eye of a new cohort of investors. This year bears witness to a few prime examples.
One common denominator threading these diverse companies together is their history of delivering market-beating returns spanning years, if not decades.
An Extraordinary Aptitude
A significant proportion of investors, including myself, point to the vast potential embodied by artificial intelligence (AI) as the primary allure of Nvidia stock. Undoubtedly, this stands as a pivotal factor (more on that shortly). Nevertheless, a captivating aspect of the company lies in CEO Jensen Huang’s extraordinary knack for anticipating the next big trend and architecting solutions tailored to meet that demand.
Nvidia revolutionized gaming in 1999 with the inception of the graphics processing unit (GPU). By 2006, the company had already pivoted the technology towards streamlining supercomputing. Fast forward to today, the once-humble GPU has transformed into the quintessential standard for cloud computing and data centers globally, commanding a staggering 98% share in the data-center GPU market last year based on insights from TechInsights.
Moreover, Huang fortuitously positioned Nvidia to tackle the impending AI revolution as early as 2013, staking the company’s future on an emerging technology at the time. When AI surged to prominence early last year, Nvidia reaped the fruitful rewards of Huang’s decade-old strategic foresight.
The Revelatory Outcomes
They say a picture is worth a thousand words. In this instance, Nvidia’s financial outcomes articulate the tale. In the second quarter of fiscal 2025 (ending July 28), Nvidia reported a record revenue of $30 billion, marking a 122% surge year over year and a 15% sequential rise. This feat was propelled by a record data-center revenue of $26.3 billion, reflecting a remarkable 154% increase. Profits soared in tandem, evidenced by a 168% upsurge in diluted earnings per share (EPS) to $0.67.
Management forecasts Nvidia’s winning streak to persevere, albeit at a more moderate pace. Projections hint at revenue amounting to $32.5 billion, denoting a 79% year-over-year growth trajectory accompanied by increased profitability. While this might represent a deceleration compared to the triple-digit growth witnessed over five consecutive quarters, it inherently stands as a noteworthy achievement.
The Timeliness Conundrum
You might be musing that Nvidia has been soaring since early last year, with the low-hanging fruits already plucked. The stock has surged by a monumental 837% since the year’s commencement (as of Thursday’s market closure), recently hitting an all-time high.
However, we remain in the nascent phases of AI, with novel use cases still surfacing. Some may attribute early stumbles as a sign of the technology’s premature state. While that holds partial truth, it’s only a matter of time before the kinks are ironed out, and AI asserts its dominance. Bearing this in mind, one might posit that the most substantial gains linked to AI are yet to materialize.
Assessing the Nvidia stock price paints a steep picture, trading at 64 times earnings and 35 times sales—figures that may seem exorbitant in typical scenarios. Nevertheless, corroborating this with analysts’ conservative consensus estimates spotlighting Nvidia’s anticipated EPS of $4.05 for fiscal 2026, commencing in January; the stock’s closing price on Thursday translates to about 33 times forward earnings, a margin scarcely loftier than the S&P 500’s 30 multiple. Forecasts further project Nvidia’s profit to burgeon by 52% annually over the forthcoming five years, underscoring why the stock deserves a premium valuation.
Viewed in its entirety, an intricate narrative unfolds, asserting Nvidia’s growth trajectory remains far from plateauing, the expanding scope of the AI market continues to burgeon, and the apparent stock valuation isn’t as prohibitive as one might initially assume.
Not to forget, there resides another facet: I’m banking on Huang’s foresightedness in envisaging the next breakthrough and steering Nvidia’s technology towards lucrative solutions—a recipe bound for prosperous outcomes.
In hindsight, the allure of Nvidia stock is irrefutable, cementing its position as my foremost choice—should I be restricted to selecting just one stock at present.
Verdict on Investing $1,000 in Nvidia Today
Before delving into Nvidia shares, it’s prudent to ponder this:
The analysts at the Motley Fool Stock Advisor recently unveiled what they identify as the 10 best stocks for investors to delve into at present, and Nvidia failed to clinch a spot on that list. These chosen ten stocks harbor the potential to yield astronomical returns in the foreseeable future.
Flashback to when Nvidia earned this accolade on April 15, 2005… imagine investing $1,000 at the time of recommendation; you’d be sitting on $845,679 today!*
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