Stock market

Up 20,000% in 10 years, has Nvidia stock run its course?

Nvidia (NASDAQ: NVDA ) is one of the most impressive stocks on the market right now.

In the last decade, its share price has increased by an incredible 20,067.1%. It ranks as one of the best performing stocks during this period.

Zooming in, Nvidia’s performance has also been very strong. It has increased by 210.6% in the last 12 months. This year alone it is 88% higher than 9.4%. S&P 500.

But with its share price rising so much over the past decade, investors may be apprehensive about investing in the stock. As a potential investor, I always want to make sure I don’t take risks I’m not comfortable with.

With that in mind, is Nvidia’s price going up too fast?

Value

Whether or not Nvidia stock is overvalued depends partly on personal opinion. But I want to look at its fundamentals to gauge it, starting with its price-to-earnings (P/E) ratio. For Nvidia, it sits at around 76. As we can see, this is more than any of the rest of the Magnificent Seven. is the closest. Amazonwith a P/E of about 53. To me, that means Nvidia looks overpriced.

Created on Trading View

Comparing its price-to-sales (P/S) ratio reveals a similar picture. Nvidia’s P/S is around 37. Again, this is more than all of its peers.


Created on Trading View

The perils of the bubble

Based on the above, I don’t see much value in Nvidia right now. In fact, I am aware that we may see its share price pull back soon.

That’s because some market watchers believe stocks are in a bubble. Investors are buying into the hype surrounding it, but it comes with risk. With too much focus comes the risk of large amounts of volatility.

Future development

The other side of this is the argument that the hype is justified. Given Nvidia’s impressive growth, it’s hard to disagree.

Last year’s revenue rose 126 percent to $60.9 billion. By 2025, its projected revenue will top $110bn.

Thus, Tuesday (May 7) Goldman Sachs Maintained a Buy rating on Nvidia and raised its 12-month price target to $1,100 from $1,000.

For the period between 2025 and 2027, the broker raised its revenue forecast for the chipmaker by an average of 8% annually. He said Nvidia’s data center business will be a key driver for the company, which predicts strong revenue growth for the rest of the year.

The investment bank also believes that spending on artificial intelligence (AI) is likely to continue this year and beyond as demand continues to grow. That’s music to the ears of Nvidia shareholders.

my trick

I already own the shares, so I am not adding to my holdings. But even if I didn’t, I still don’t see the stock as an attractive investment opportunity.

I’m happy with Nvidia in the long run. That said, I’m wary that we could see its share price plummet at the first sign of any slowdown. At that point, maybe I’ll consider buying some more shares.

Nevertheless, I want to expand my exposure to AI, and I think there are a lot of opportunities out there.

There are a few companies on my watch list that I will research further before considering Nvidia.


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