The stock market is great for building wealth slowly over decades. But some investors are speeding things up by betting on the right companies at the right time.
Nvidia (NASDAQ:NVDA) is a great example. If you bought $5,000 worth of stock in the company 10 years ago, you’d have about $1.25 million today. This is a 25,000% profit. Does the legendary chipmaker still have the potential to become a billionaire? Let’s find out more.
constantly reinventing themselves
1993, Nvidia was established develop a niche computer chip called graphics processing unit (GPU). These chips are great at handling multiple tasks simultaneously, making them ideal for rendering complex visuals. Most of Nvidia’s early growth came from serving the video game industry. the chip was used On your custom PC or console.
However, with its release in 2009, Bitcoin (and the subsequent rise of cryptocurrencies) was the company’s first big break. At that time, most blockchain networks system called Proof of work (PoW) required participants called miners to solve complex calculations to verify transactions and create new coins.
GPUs were perfect for this task. And Nvidia’s revenue and profits soared in response to this new market. As mining demand wanes after the pandemic, ChatGPT’s launch in 2022 begins a new boom cycle for the company and its typical hardware products.
lessons from the past
Although past performance is no guarantee of future results, NVIDIA’s history shows a clear pattern of boom and bust. Although the company has produced many billionaires over the long term, investors who bought the stock at the peak of previous hype cycles faced large losses as they waited for the company to find new opportunities. did.
Unfortunately, the AI hype cycle is getting longer. And Wall Street is getting nervous. The nonprofit Rand Corporation predicts that more than 80% of AI projects will ultimately fail, twice the rate of non-AI technology startups.
There are many reasons for the high failure rate, the most obvious being that AI technology is not easy to monetize. mainstream large language model (LLM) like ChatGPT and Gemini are fun to play with, but can be unreliable and expensive to run. Hardware and energy costs.
these platforms Also It faces stiff competition from free and open source alternatives such as: meta platform‘s Llama or Elon Musk’s Grok. Unless the consumer software side of the market starts to carry its weight, demand growth for Nvidia’s hardware could eventually slow or even reverse.
the story continues
Is Nvidia a billionaire manufacturer?
If Nvidia’s business is on the verge of a spectacular collapse, there are no signs yet. Second quarter earnings were also impressive, with revenue up 122%. YoY comparison Sales were $30 billion, and operating income increased 156% to $19.9 billion.
And management believes the launch of GPUs based on the new Blackwell architecture will help maintain that. wonderful Momentum for the next few years.
The stock’s valuation is also very attractive. With forward stock price earnings ratio (PER) is 41, and the stock price is Nasdaq 100 But this is actually surprisingly cheap for a company that is growing its top line and bottom line at triple-digit rates.
The market appears to be discounting Nvidia stock due to concerns that the AI industry will not live up to expectations. This stock still has the potential to make you a millionaire, but long-term investors may want to wait for the current hype cycle to fade before betting on this chipmaker’s next big break. do not have.
Should you invest $1,000 in Nvidia right now?
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Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Will Ebifan has no position in any stocks mentioned. The Motley Fool has a position in and recommends Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.
Is Nvidia still a billionaire manufacturer stock?Originally published by The Motley Fool
