Another year, another big profit. That seems to be shaping the situation for Nvidia. (NVDA 1.18%). With only a few weeks left in this year, the GPU maker’s stock price is rising significantly.
It’s too late for investors who don’t own Nvidia to benefit from the stock’s past performance. But should you buy Nvidia stock Hand Over Fist before the end of 2024? Here’s what history suggests.
Great first quarter performance
In most cases, there is no reason to rush into buying a stock. It often doesn’t matter much whether you buy a stock now or after a few months. However, Nvidia is a different story.
The company held an initial public offering on January 22, 1999. In the nearly 25 years since then, NVIDIA has posted a positive profit in the first quarter 20 times. The company’s average gain in the first quarter was a staggering 19%. If you waited until the new year, you would almost certainly be poorer.
Since its IPO, Nvidia’s stock has posted double-digit percentage increases in 14 of 25 total first quarters. The most impressive performance came last year, when NVIDIA’s stock price soared 90%. However, the first quarter of 2024 saw a massive 82.5% increase, making it the stock’s second-best first quarter performance on record.
NVDA data by YCharts
Admittedly, Nvidia’s first quarter performance was dismal. In the first quarter of 2008, the stock price fell approximately 42%. However, over the past decade, Nvidia has only had a negative first quarter once, with the stock dropping about 7% in the first quarter of 2022.
expand your horizons
Of course, most investors don’t buy Nvidia stock before the end of the year and sell it three months or so later. How have stocks performed over time?
Nvidia has achieved positive returns in 17 of the 23 three-year periods since its IPO (including the 2022-2024 period). The average return over these three years was approximately 195%.
But if you buy before the end of a particular year and hold the stock for five years, you’re in really good shape. Nvidia’s stock price has increased in 19 of the 21 periods in the five years since its IPO. The average return over those five years was an impressive 551%.
From a historical perspective, what’s the bottom line if you buy Nvidia stock before the end of the year? It’s almost always a pretty good return.
Throw away your history books
Now, the bad news: There’s a good example of how history doesn’t really matter when it comes to investing in Nvidia. why? The present is different from the past.
Most of Nvidia’s great work to date predates the explosion of generative AI. When Nvidia made its biggest profits, interest rates were also much lower. Rivals are scrambling to develop chips to compete with Nvidia’s GPUs. As the supply of AI chips catches up with demand, interest rates remain (relatively) high, and competition increases, future stock returns could be significantly lower.
However, there’s also an argument that Nvidia’s future could be even brighter than its past. CEO Jensen Huang believes the company’s new Blackwell GPU architecture could be the most successful product not just in Nvidia’s history, but in the “history of computers.” Importantly, Nvidia is currently in a cycle of releasing new chips annually, with even more powerful GPUs expected to follow Blackwell.
AI is still in its infancy. New advances, potentially including artificial general intelligence (AGI), could boost Nvidia’s growth like never before. Even if you eliminate AI completely, the company could have a $1 trillion opportunity as organizations move from general-purpose computing to accelerated computing.
If you think Nvidia’s growth prospects will improve (and there’s good reason to do so), throw out the history books. It makes perfect sense to redeem this stock before the end of the year.
Keith Speights has no position in any stocks mentioned. The Motley Fool has a position in and recommends Nvidia. The Motley Fool has a disclosure policy.
