Potentially, Nvidia's Shares Could Aid in Accumulating Millions for Retirement?
Potentially, Nvidia's Shares Could Aid in Accumulating Millions for Retirement?
It's amusing to watch some stocks skyrocket, and the urge to own one before that steep climb might be hard to resist. However, investing for retirement isn't about trying to score a single big win. Piling all your money into one stock can lead to unnecessary fear and tension over your savings. Imagine if all your savings were tied up in Tesla when it fell by 65% in 2022.
Allocating a sensible amount, continuing to invest, and holding shares in an excellent business during the natural highs and lows can pave the way for a comfortable retirement. It might even make you a millionaire. Here's why Nvidia (NVDA 4.45%) is showing investors why it's a remarkable business, and one that could help you become a millionaire.
Is it a parabolic stock or a parabolic business?
Nvidia stock has soared over 800% since the start of 2023. This surge might be due to investors who fear missing out on the next big thing. Some of this buying is likely from those who engage in momentum trading with stocks. However, this is more akin to gambling than investing. The true value lies in the underlying business for long-term investors.
Several factors are drawing long-term investors to Nvidia. The substantial growth potential for artificial intelligence (AI) use cases is one reason. But it's not just potential that's driving up Nvidia stock; it's also results. Over the last two years, Nvidia's revenue has more than quadrupled. Nvidia's GPUs (graphics processing units) have become the industry standard as dozens of tech companies work to create and monetize generative AI models.
Due to its increased sales and stock price, $10,000 invested in Nvidia stock at the start of 2023 would be worth nearly $92,000 now. This significant two-year return is rare and not something investors should anticipate regularly. However, purchasing and holding Nvidia stock for several years could still realistically make you a millionaire.
A vast customer base
Some investors worry about whether Nvidia can sustain its growth. Despite the slowing pace of growth, there are reasons to believe it can. Its first generation of GPU chips had customers lining up to buy. Although much investment has already been made to build the compute power required for AI, Nvidia's product launches and tangential offerings should keep its revenue growing.
Demand for its Blackwell AI accelerator is "incredible," according to CEO Jensen Huang. This trend is likely to continue in 2024 as production ramps up for the new architecture, and the Rubin platform will replace Blackwell in 2026. Nvidia makes it easy and sticky for customers, too. Its CUDA (compute unified device architecture) software platform helps developers expand applications on various types of GPU-accelerated embedded systems. It has created a GPU computing ecosystem. With more powerful GPUs during this period, customers using CUDA get locked in with Nvidia.
While spending from some large technology companies that have been first in line for Nvidia chips may slow, there is still a long line that should keep demand strong. The sequential, quarter-over-quarter revenue growth in Nvidia's data center segment had, in fact, decreased for five quarterly periods since its quarter ending July 2023. However, this trend stabilized in its most recent quarter, as data center revenue grew by 17%, an improvement of 100 basis points over the previous period.
Huang isn't just talking to CEOs about how Nvidia's products can help customers. He's traveling the world, meeting with world leaders as he promotes the next growth phase of "sovereign AI."
Sovereign AI refers to a nation's investments in AI to push innovation across many fields through high-performance computing and using domestic infrastructure, labor, and data and business networks.
Buy and hold is the key
There are numerous opportunities to continue driving revenue, earnings, and share price growth for Nvidia. However, it won't be a smooth ride up. Achieving millionaire status through investing requires patience and the will to hold, or even add shares, during the inevitable cycles.
The long-term future looks promising for Nvidia, and investors would likely do well to buy and hold the stock for several years and decades to come.
Engaging in regular financial planning and allocating a portion of your savings for investing in stocks like Nvidia could help secure your retirement funds. By following a strategy of purchasing and holding onto Nvidia shares for several years, you might be able to accumulate a substantial wealth, potentially reaching millionaire status.
The success of Nvidia's stocks is not solely based on fleeting trends or momentum trading but primarily on the solid performance and growth potential of its underlying business, particularly in the field of artificial intelligence.