Nvidia has delivered a whopping 89,513.7% return to our subscribers since we first recommended it in the July 2002 issue of Wall Street Stock Forecaster at $0.14317 per share (adjusted for share splits).
Over the last year alone, the shares are up 185.1%. In comparison, the S&P 500 offered only a 27.2% gain.
We feel now—ahead of the next cyclical upswing—is a good time to add high-quality tech stocks with solid long-term outlooks. This stock is a buy.
NVIDIA CORP. (Nasdaq symbol NVDA) is a leading designer of 3D-capable video chips; they make video games run more smoothly and appear more lifelike. Nvidia has also adapted its chips for other applications, including artificial intelligence (AI), datacentres and self-driving cars.
The U.S. government recently imposed new restrictions that prevent chipmakers from selling advanced chips for artificial intelligence (AI) applications to customers in China and Russia. The company no longer sells chips to customers in Russia, but halting exports to China will cut its quarterly sales by $400 million.
Despite this setback, Nvidia’s long-term outlook remains bright. Its AI chips are the clear leaders in this emerging market, and it will probably re-configure its non-AI chips for its datacentre customers in China.
In its fiscal 2025 first quarter, ended April 28, 2024, Nvidia’s revenue soared 262.1%, to $26.04 billion from $7.19 billion a year earlier. That easily beat the consensus forecast of $24.65 billion.
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Earnings before unusual items also jumped 461.5% in the quarter, to $0.612 a share (or a total of $15.24 billion) from $0.109 a share (or $2.71 billion). That also beat the consensus estimate of $0.559.
Nvidia has split its shares on a 10-for-1 basis, which makes the stock more affordable for individual investors and the company’s employees. The split took effect on June 10, 2024.
Growth Stocks: Nvidia’s high R&D spending should keep producing high-demand products
Nvidia continues to spend heavily on the development of new products. In the latest quarter, its research costs rose 45.1% to $2.72 billion, or a high 10.4% of its revenue.
Thanks to that spending, the company recently launched its Blackwell AI platform and chips, which use 25% less energy than its preceding chips. Major computing firms such as Alphabet (Google), Amazon.com, Microsoft, Dell, Oracle and Meta Platforms now plan to use the Blackwell platform to run their AI applications.
The stock has jumped 185.1% over the last year. That’s after the company has reported better-than-expected results but also increased its forecasts going forward. Those revisions are largely due to strong demand for chips that power AI applications, such as the popular ChatGPT online chatbot/search engine.
Nvidia has split its shares on a 10-for-1 basis, which makes the stock more affordable for individual investors and the company’s employees. The split took effect on June 10, 2024.
The stock now trades at 47.2 times its forecast fiscal 2025 earnings of $2.72 a share. That’s a high P/E, but acceptable in light of the company’s market leadership. As well, the shift to AI will require datacentres to replace traditional CPU (central processing unit) chips with Nvidia’s faster GPU (graphics processing unit) chips over the next few years.
Moreover, the company raised your quarterly dividend by 150.0% with the June 28, 2024, payment, to $0.01 a share (post-split). The stock has already gained 173% since the start of 2024, which is why the new annual rate of $0.04 (post-split) yields just 0.03%.
We hope you benefited from this analysis of Nvidia Corp. The company is just one of the top-performing stock picks of our Wall Street Stock Forecaster newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
This safety-conscious publication offers you many more market-leading Buy recommendations for maximum returns.
This post was originally published in April 2023 and is regularly updated.
Comments
Richard
My question is: as you recommend, a buy for aggressive investors or would it also be a buy for a conservative investor who is thinking of adding a small position in their TFSA?
In general, holding higher-risk stocks in your TFSA is a poor investment strategy. That’s because high-risk stocks come with a greater risk of loss. If you lose money in a TFSA, you lose both the money and the tax-deduction value of the loss. (Outside your TFSA, you can use capital losses to offset taxable capital gains.) You’ll also lose the main advantage of a TFSA: sheltering gains from tax. You won’t have gains to shelter if the value of your investments falls. That reality is key to determining the best investment for TFSA investing.
So, we think you are best to hold lower-risk investments in your TFSA. That’s because as mentioned, you don’t want to suffer big losses in these accounts. If you do, you can’t use those losses to offset capital gains.
Looking specifically at Nvidia: There’s certainly no reason why you can’t hold the stock in your TFSA—but at its current price, it is a more aggressive pick—and you’ll need to weigh the factors above before making a decision.
I have followed and subscribed to Pat’s TSI for years and have built my entire portfolio based on his advice. As I review the YTD results of the equities it is clear that the 70% which is invested in Canadian stock is in a negative position ranging from -1% to as much as -17% (BCE) while the remaining 30% that I hold in U.S. stocks are doing very well with the exception of MCD . Depressing!
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My question is: as you recommend, a buy for aggressive investors or would it also be a buy for a conservative investor who is thinking of adding a small position in their TFSA?
Thanks for your question.
In general, holding higher-risk stocks in your TFSA is a poor investment strategy. That’s because high-risk stocks come with a greater risk of loss. If you lose money in a TFSA, you lose both the money and the tax-deduction value of the loss. (Outside your TFSA, you can use capital losses to offset taxable capital gains.) You’ll also lose the main advantage of a TFSA: sheltering gains from tax. You won’t have gains to shelter if the value of your investments falls. That reality is key to determining the best investment for TFSA investing.
So, we think you are best to hold lower-risk investments in your TFSA. That’s because as mentioned, you don’t want to suffer big losses in these accounts. If you do, you can’t use those losses to offset capital gains.
Looking specifically at Nvidia: There’s certainly no reason why you can’t hold the stock in your TFSA—but at its current price, it is a more aggressive pick—and you’ll need to weigh the factors above before making a decision.
I have followed and subscribed to Pat’s TSI for years and have built my entire portfolio based on his advice. As I review the YTD results of the equities it is clear that the 70% which is invested in Canadian stock is in a negative position ranging from -1% to as much as -17% (BCE) while the remaining 30% that I hold in U.S. stocks are doing very well with the exception of MCD . Depressing!
Thanks for your feedback.