How much money you would have if you bought R1,000 of Nvidia shares 10 years ago

A R1,000 investment in Nvidia shares ten years ago would be worth roughly 482 times more today, an analysis by MyBroadband has shown.

Nvidia’s share price on the US stock exchange Nasdaq closed at $1,224.40 (R23,178) on Wednesday, 5 June 2024.

That was 257.31% higher than its closing price of $4.74 (R48.16) on 5 June 2014.

On a constant currency basis, which assumes no change in the rand’s value to the dollar, the R1,000 investment would have been worth roughly R258,252.

However, the actual increase in rand was substantially higher, as the currency has weakened significantly over the past decade.

Over the same period, the rand went from trading at R10.16 to R18.93 to the dollar. Any shares purchased when the rand was stronger would be worth more today.

At the initial exchange rate from 10 years ago, R1,000 would have bought 20.76 Nvidia shares.

Those shares would be worth $25,419 on 5 June 2024, working out to roughly R481,862 at the current exchange rate — an increase of 480.86%.

The table below shows how much a R1,000 investment in Nvidia would be worth today, taking into account the devaluation of the rand.

Nvidia’s share price has increased so dramatically that it is splitting the stock 10-for-one on Friday, 7 June 2024.

The stock split will increase the number of issued and outstanding shares 10-fold while dividing each stock’s value by 10.

Each share an investor holds will become ten shares, each worth a tenth of their value at the time of the split.

The investor who bought the 20.76 shares in the example above will now have 207.6 shares, but the total value will remain unchanged.

While this has little impact on existing shareholders, it could make Nvidia’s stock attractive to new individual investors who can only buy entire shares.

From games to AI powerhouse

Founded by Jen-hsun “Jensen” Huang in 1993, Nvidia began as a graphics processing unit (GPU) business.

Its primary target markets were PC gamers and content creators who worked with video and 3D rendering.

The emergence of proof-of-work ASIC-resistant cryptocurrencies also saw demand for Nvidia’s graphics cards skyrocket.

While not intended in their original design, GPUs’ capability to handle large amounts of data also made them ideal for performing the calculations needed to verify transactions on blockchains like Ethereum.

Nvidia is also a major provider of automotive chips, which are used to run increasingly smart and demanding onboard computers and infotainment systems in cars.

However, its most explosive growth in recent years has primarily been due to demand for the company’s artificial intelligence (AI) accelerators.

The company is the world’s leading designer of accelerators used in data centres that power tools like OpenAI’s ChatGPT and Microsoft Copilot.

Huang continues to serve as the company’s president, CEO, and board director.

Possible overvaluation

While there is no denying that there is great demand for Nvidia’s products, some analysts caution that its share price jump could be due to a bubble.

Nvidia’s earnings per share have not kept pace with its share price increase, resulting in a high price-to-earnings (P/E) ratio, a possible indicator that a stock is overvalued.

Nvidia’s P/E ratio stood at 70.9 on 5 June 2024, based on earnings per share of $17.27 and a share price of $1,224.40.

The current P/E ratio is 43% higher than Nvidia’s average P/E over the past decade, which is 49.74.

While the P/E is significantly better than rival AMD’s 244.43, it is worse than Intel, Microsoft, and Qualcomm’s.

Another indicator of stock overvaluation is the price-to-sales (P/S) ratio, which is calculated by dividing Nvidia’s stock price by its latest revenue per share.

As of 5 June 2024, that stood at about 38.26, significantly higher than the 10-year median of about 13.02.

This number also exceeds the P/S ratios of all Nvidia’s peers.

While the company has shown good revenue and profits in its recent history, the question remains whether this momentum can be sustained if demand for AI accelerators starts winding down and more competitors enter the market.