It can be fun to watch some stocks skyrocket, and it’s tempting to want to own them before that parabolic move occurs. However, investing for retirement doesn’t mean trying to profit from one big purchase. In fact, it can lead to fear and anxiety about your nest egg. Consider what would have happened if all your savings had been put into Tesla stock when it plummeted 65% in 2022.
But allocating the right amount, staying invested, and owning shares in great companies through the inevitable ups and downs can lead to a comfortable retirement. It can even make you a millionaire. Here’s why we choose Nvidia. (NVDA -1.68%) It shows investors why it’s a great business and could help retire millionaires.
Is it a parabolic stock or a parabolic business?
Nvidia stock has soared more than 800% since the beginning of 2023. Sometimes such moves are driven by investors who fear missing out on the next big opportunity. Perhaps some of that buying is from people looking to trade momentum stocks. But it’s more like gambling than investing. It’s the underlying business that lures long-term investors into stocks.
Much of what attracts long-term investors to Nvidia is its huge growth potential in artificial intelligence (AI) use cases. But NVIDIA’s stock price rose not just because of its potential, but also because of its results. Revenue has more than quadrupled in the past two years. Dozens of tech companies are building and monetizing generative AI models, and Nvidia’s GPUs (graphics processing units) have become the industry standard.
As a result of explosive sales and stock prices, $10,000 invested in Nvidia stock at the beginning of 2023 would be worth nearly $92,000 today. The huge returns over the last two years are unusual, and investors shouldn’t hold out hope. But if you buy and hold Nvidia stock for years to come, you could realistically become a billionaire.
customer world
Some investors are questioning whether Nvidia can sustain its growth. There is reason to believe it can be achieved, even if the pace of growth slows. Its first generation GPU chips had customers lining up to buy them. Although a lot of capital is already being spent to build out the compute power needed for AI, Nvidia’s product launch plans and tangential offerings should continue to drive revenue growth.
Demand for the company’s Blackwell AI accelerator has been “incredible,” according to CEO Jensen Huang. This situation is likely to continue next year as production of new architectures increases, with the Rubin platform set to replace Blackwell in 2026. NVIDIA is persistently and easily making it possible for customers. The company’s CUDA (Computing Unified Device Architecture) software platform helps developers scale applications on embedded systems with various types of GPU acceleration. This created the GPU computing ecosystem. As more powerful GPUs become available, customers using CUDA will become locked into Nvidia.
Image source: Getty Images.
Spending from some big tech companies that prioritize Nvidia chips may slow, but demand should remain strong and there are still long lines. In fact, quarter-over-quarter revenue growth in Nvidia’s data center division has declined for five consecutive quarters, starting with the quarter ending July 2023. However, that trend stabilized in the most recent quarter as data center revenue increased 17%. Increased by 100 basis points from the previous period.
Huang isn’t just talking to CEOs about how Nvidia’s products can help customers. He travels the world, meeting with world leaders and promoting the next stage of growth in “sovereign AI.”
Sovereign AI refers to national AI investments to drive innovation across a variety of sectors through high-performance computing and the use of domestic infrastructure, workforce, data and business networks.
Buy and hold is most effective
There’s a good chance Nvidia will continue to drive revenue, revenue, and stock growth. However, that doesn’t mean it’s a straight road and high. Becoming a millionaire through investing takes time. It also takes faith to own or add to a stock through the inevitable cycles.
Nvidia’s long-term future looks bright, and investors would be wise to buy and hold the stock for years and decades to come.
Howard Smith has held positions at Nvidia and Tesla. The Motley Fool has positions in and recommends Nvidia and Tesla. The Motley Fool has a disclosure policy.
