If you invested $1,000 in Nvidia stock 5 years ago, how much would you have now?
A risky investment in a video game chip designer has turned into a completely different outcome.
Long-term investors tend to think in terms of years or decades rather than weeks or months. Because history shows that buying ownership in quality businesses and holding them forever is the best path to wealth creation.
5 years ago, nvidia (NVDA -1.18%) It was a very different company than it is now. Of course, management tried to capitalize on the same opportunities as today, but the results back then were very different. While some investors saw the stock as risky, others saw opportunity.
In the second quarter of fiscal 2020 (ended July 28, 2019), NVIDIA reported revenue of $2.6 billion, a 17% decrease compared to the same period last year. The biggest drag on the results was the decline in demand for graphics cards used by gamers as sales plummeted to a 20-year low due to macroeconomic headwinds. At the same time, Nvidia’s data center segment, which accounts for just 25% of revenue, fell 14% due to lower demand from cloud infrastructure providers.
Investors who bought the stock five years ago were already suffering a 17% decline ahead of the dismal financial report. By the end of 2019, Nvidia stock was essentially flat, and some investors feared the worst. But a lot can happen in five years, and investors who toe the line have been richly rewarded.
Heading into 2024, Nvidia’s gaming division is on the mend. Other Recession due to macroeconomic headwinds. However, the data center segment benefited from accelerating demand for generative artificial intelligence (AI), recording four consecutive quarters of triple-digit growth. Moreover, Nvidia recently announced a 10:1 stock split on the back of the stock’s strong rally.
Data from YCharts.
If you invested $1,000 in Nvidia stock five years ago and weathered the headwinds, you would have nearly $35,000 today. To be clear, no one could have predicted the surge in demand for AI. But it helps illustrate the value of ignoring the daily and monthly machinations of the market. Doing so can bring huge long-term benefits to investors.
