Nvidia (NVIDIA), despite seeing its share price plunge 16% on Monday, remains the standout stock of the post-Covid period.
The key question is whether the GPU maker’s impressive growth as a business is enough to justify its even more impressive – some might say awe-inspiring – share price. And this is perhaps what led some investors to sell out following the launch of China’s DeepSeek, a low-cost disruptive entrant to the artificial intelligence space.
Stephen Yiu, whose Blue Whale Growth fund has Nvidia among its top 10 holdings, thinks that the company is set to remain a key player in five years. However, he acknowledges that whether its share price will recover, rise or fall further over a five-year timeframe is very difficult to predict.
“Nvidia will remain one of the most prominent companies in the world, but it doesn’t mean Nvidia is going to triple or quadruple in share price, which is what it did before,” Yiu told the Good Money Guide.
The firm has been boosted by the seemingly insatiable demand for generative AI, and the chips required to train and run the large language models or LLMs that power the chat bots.
In the autumn of 2014 revenue at Nvidia stood at just $4.60 billion per annum, a decade later and that figure was comfortably above $113.0 billion. This could grow higher still as the company begins to roll out its new generation of Blackwell chips.
Yiu notes that Nvidia’s software platform is “very sticky”, largely because the GPU maker has its own proprietary coding language CUDA.
This makes it difficult for users of its products to switch providers, and should continue to retain its revenue and support further growth. Even DeepSeek has been programmed on an Nvidia GPU.
Nvidia’s share price performance is even more eye-catching than its revenue growth, regardless of the hit it took on 27 January. Over the last decade the stock price has risen by more than 25,000.0%.
The company is still priced for growth on a forward PE of 30.03 as times earnings, a price to book of 47.97 times, while its price to sales ratio is at 30.03.
Many of these ratios make a mockery of traditional valuation methods, advocates of growth investing will tell you that this is a new paradigm or say this time it’s different, often described as the most frightening phrase in finance, and for good reason.
“If in five years time we still have AI, then Nvidia is fine. But how much money are you going to make from Nvidia? That’s the question,” Yiu added.
“If you asked me if Apple would be around for the next five years, it’s likely. But are you going to make any money from Apple? I’m not sure.”
Clouds on the horizon could come from the ability of the firm and its agents, such as TSMC to make its GPU chips, in the volumes and timeframes they are demanded in. And for the end customers to build and power the data centres to make them operable.
Robin has more than six years of experience as a financial journalist, most of which were spent at Citywire, and covers the latest developments in the investing, trading and currency transfer space. Outside of work, he enjoys reading literature and philosophy and playing the piano.
You can contact Robin at robin@goodmoneyguide.com
