Nvidia stock's rapid growth compared to Apple, but caution advised due to steep valuation

From Nasdaq: 2024-07-20 08:21:00

Nvidia (NASDAQ: NVDA) has seen an incredible 1,000% gain in less than two years, making it a hot topic among investors. The stock’s growth potential is compared to Apple in 2004, with AI being the next big thing. However, some warn that Nvidia’s valuation resembles Oracle in 2000, which could lead to a stock market bubble burst.

Apple soared in the 2000s, with a compound annual growth rate (CAGR) of 36% and total returns of $4.8 million on a $10,000 investment made 20 years ago. On the flip side, Oracle’s stock suffered an 85% drawdown post the dot-com bubble burst and took over 20 years to recover its pre-bubble high. This serves as a cautionary tale for overhyped tech stocks.

Nvidia’s price-to-sales ratio mirrors Oracle’s before its 2001 crash, raising concerns about its steep valuation. While the company is thriving on AI and semiconductor spending, increased competition, market saturation, or a slowdown in spending could impact its P/S ratio. Investors should exercise caution with Nvidia stock amidst unpredictable market conditions.

Consider the 10 best stocks identified by The Motley Fool Stock Advisor team for potential investments. While Nvidia may not be on the list, the recommended picks could yield significant returns in the future. With guidance on building a successful portfolio, regular updates, and new stock picks, the Stock Advisor service has outperformed the S&P 500 since 2002, providing valuable insights for investors.



Read more at Nasdaq: Where Will Nvidia Stock Be in 20 Years?