Nvidia for the long run

Byron just covered Nvidia's current results, but I'd like to look at their history since we started buying them for a few brave clients in 2015. Their main business at that time was souped up graphics processors (GPUs) in expensive desktop computer gaming rigs. It became clear later that GPUs were very good at processing large amounts of data and three growing industries became reliant on Nvidia's chips; self-driving cars, data centres and emerging machine learning applications.

One of our clients bought $1 000 worth of Nvidia back than which is now worth $83 000. It hasn't all been plain-sailing though. In 2017 and 2018, Nvidia chips were in hot demand to build crypto-mining rigs. The share price boomed alongside bitcoin, but when the bitcoin bubble popped, the Nvidia share price crashed too, almost halving.

It was clear back then that Nvidia had a big technology lead over its rivals. The stock did well, and over time became more widely held in our client base.

In 2021, the world got excited about the metaverse, and Nvidia chips were a key component of the supercomputers required to run it. Coupled with the metaverse mania, working-from-home gamers were spending a fortune on upgrading their computers. The Nvidia share price soared higher again. A few month later the world decided that the metaverse was stupid, and the Nvidia share price crashed by 64%. Ouch!

To enjoy amazing returns, that $1 000 buyer needed to stick with the stock through all those vicious ups and downs. Short-term traders would have been washed out along the way. Stock jockeys looking for momentum, poring over their technical analysis charts and watching the news headlines would have been blown away. None of them would be up 8 000% like our long-term legend.

We don't know what the future holds, but buying quality companies and then being patient usually results in the best outcome.