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While it might feel disheartening to look at a company’s past stock growth and see what could have been, it’s also a great exercise to see what’s possible for the future. As a high-growth company, Nvidia (NVDA -2.79%) has seen its shares skyrocket over the long term, illustrating the importance of holding stocks over many years. Doing so can safeguard your investment against temporary economic headwinds, like the ones that triggered steep declines for many companies in 2022.
Nvidia’s stock fell 50% throughout last year. However, its shares have still retained 269% growth over the last five years despite the sell-off. And with that, let’s look at how much a $10,000 investment in Nvidia’s stock a decade ago, in 2013, would be worth today.
Stellar growth
Founded in 1993, Nvidia went public in January 1999, with its stock soaring 55,000% since then. While most companies tend to experience the most growth in the beginning, Nvidia has still provided immense gains since 2013, as it almost singlehandedly founded the consumer graphics processing unit (GPU) market.
Before Nvidia, there was hardly a consumer (aka discrete) GPU market to speak of, with the company cashing in on the rising popularity of people building their own PCs for gaming and other purposes. As a result, Nvidia held an 88% market share in discrete GPUs as of the third quarter of 2022, according to Jon Peddie Research.
While declines in the PC industry in 2022 brought worldwide GPU shipments down 42% over the year, the market’s past growth has propelled Nvidia into a dominating position in tech.
Since 2013, Nvidia’s stock has soared by 7,050%. The colossal growth is almost unheard of compared to its peers, as seen in the table below.
Data by YCharts
Taking into account Nvidia’s marginal dividends over the years, an investment of $10,000 in the company’s stock in 2013 would be worth $807,205 today. The annual rate of return would be about 54%.
Building the future
While Nvidia’s stock is unlikely to soar another 7,000% over the next decade, it still has the potential for significant growth well into the future. The consumer GPU market is currently in a slump and will need time to recover. However, Nvidia’s success in the space has given it the power and financial resources to find more lucrative applications for its high-powered devices.
Since Jan. 1, Nvidia’s stock has shot up 55%, as the company’s prospects in artificial intelligence (AI) have rallied investors. The tech giant’s GPUs have the power to run and develop AI software, a market projected to grow at a compound annual growth rate (CAGR) of 37.3% through 2030. Since tech start-up OpenAI launched ChatGPT, a chatbot capable of producing human-like dialogue, in November 2022, many companies have shifted focus to the industry.
Microsoft‘s $1 billion investment in OpenAI in 2019 looks like one of the best decisions it has ever made, as the start-up’s advanced software has been integrated into Azure and Bing. Meanwhile, Nvidia’s recent partnership with Microsoft’s Azure to build a massive AI computer is a promising step for its venture into the burgeoning market.
Another fruitful application for Nvidia’s GPUs that is already boosting revenue is in data centers, propelled by the swiftly expanding cloud industry. In the company’s third quarter of fiscal 2023, ended Oct. 30, 2022, its data center segment reported year-over-year growth of 30.5%, earning the largest portion of revenue at $3.8 billion. As the cloud market still has plenty of room for growth, with a projected CAGR of 15.7% through 2030, according to Grand View Research, Nvidia is well-positioned to continue seeing gains for years.
Nvidia has awarded patient investors with immense stock growth since 2013, achieving success by pushing technology forward in the consumer GPU market. Its crucial role in cloud computing and especially AI could see it do the same. The company may not offer the same growth over the next decade, with increased competition from Intel and AMD, but its dominance in tech and long-term outlook make its stock a screaming buy.
Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long March 2023 $120 calls on Apple, short January 2025 $45 puts on Intel, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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