I have a confession: I don’t own Nvidia (LSE: NVDA) shares. In my defence, I’m British.
I hold plenty of FTSE 100 stocks directly, but only invest in the US via trackers. That’s one reason why I don’t hold Nvidia, but there’s another more important one.
When the AI chipmaker’s bandwagon started rolling last summer – I mean, really rolling – I decided I’d already missed my chance. The Nvidia share price had been going gangbusters and I thought: it can’t go on like that.
It’s my typical response to red-hot momentum stocks. I’m scared of hopping on board just as the wheels come off. As a result, I’ve missed out on a lot of excitement from Nvidia, Tesla, Amazon and the like.
I need to stop worrying and buy growth stocks
It’s time to rethink my attitude to growth stocks. But I still keep banging my head against the wall with the same question, only more so. Have I left it too late?
Nvidia shares are up 165% over the past year. Over five years, they’ve soared 2,195%. The company has a market cap of $3.3trn. It can’t keep growing at the same rate, it would swallow the entire global economy.
Then there’s its valuation. The shares now have a price-to-earnings ratio of 55.1. That’s very expensive.
By comparison, the S&P 500’s P/E is around 33 times (and most investors think that’s pricey). Yet Nvidia’s earnings continue to soar. They jumped 94% year on year in Q3 to $35.1bn. Suddenly, Nvidia doesn’t look so expensive. Its forward P/E is just 30 times earnings.
A big attraction is that Nvidia isn’t pouring huge sums into building AI infrastructure. It leaves that to others. It doesn’t even manufacture its high-performance graphics processing units (GPUs). That’s outsourced to third-parties like the Taiwan Semiconductor Manufacturing Company and Samsung.
I’m late to the party but will go anyway
This makes it a capital-light business. On the other hand, it brings geopolitical risk. What happens if China invades Taiwan? Plus there are potential supply chain issues, if these manufacturers are unable to keep up with demand. US President-elect Donald Trump’s mooted trade tariffs could also cause disruption.
Nvidia also has to keep innovating to maintain its leadership in GPU and AI chip technology. Plus there’s the underlying risk AI hype has been overdone.
The shares slumped more than 6% on Tuesday (7 January) amid a wider tech sell-off triggered by surging US government bond yields. That wiped out $220bn off its market value. I’m struggling to get my head round that sum. So is this my buying opportunity?
The 50 analysts offering one-year Nvidia share price forecasts have produced a median target of $174.6. If correct, that’s an increase of around 24% from today. That’s pretty good, but also shows how growth expectations are slowing.
I’ve clearly left it pathetically late to buy Nvidia. Better late than never though. I could hang around for another dip, but who knows if we will get one? So I’ll play safe by investing a smaller sum and if the share price does retreat, I’ll buy more.
The post Have I left it too late to buy Nvidia shares? appeared first on The Motley Fool UK.
But what does the head of The Motley Fool’s investing team think?
Should you invest £1,000 in Nvidia right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Nvidia made the list?
See the 6 stocks
More reading
Prediction: AI stocks will outperform again in 2025 and Nvidia will hit $200
£10,000 invested in Nvidia stock in 2020 would now be worth £244k! Here’s what could be next
Here’s how a stock market beginner could get going in 2025 with a spare £300!
Is Nvidia a bubble stock waiting to burst in 2025?
I asked ChatGPT for the best S&P 500 stocks for me to buy in 2025. Here are 3 it found
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Nvidia and Taiwan Semiconductor Manufacturing. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
