Nvidia was a promising tech company in the early 2000s, but its value has risen rapidly in recent years, when investors are said to have made huge returns. Thanks to the rise of ChatGPT and the growing popularity of chatbots powered by artificial intelligence (AI), demand for Nvidia chips has skyrocketed. The new Blackwell chips are sold out and customers now have to wait a year or more for them.
A few decades ago it would have been impossible to predict these types of scenarios; The unpredictability of growth stocks underlines why it can make sense to put some money into a promising company. In fiscal year 2004 (Nvidia’s year ends in January), Nvidia’s revenue was $1.8 billion. rejected compared to the $1.9 billion it reported last year. Although the company was still growing, its performance that year paled in comparison to the company’s recent quarters, where revenue more than doubled.
Nvidia’s business has evolved dramatically over the past few years, helping it become the most valuable company in the world, with a market capitalization of about $3.6 trillion. A $2,000 investment in the company twenty years ago would be worth about $2.2 million today. While Nvidia is unlikely to match these kinds of returns over the next twenty years given its massive valuation, it could still be a good buy for growth investors looking for a solid stock to hold on to for the long term.
Another stock that has made millionaires in recent decades is Netflix. To say that the streaming company has proven its doubters wrong over the years would be a massive understatement. Not only is it still around, but it has also been able to generate strong and growing profits from its operations, something that other streaming companies continue to struggle with.
Over the next twelve months, Netflix generated $37.6 billion in revenue, with a profit of $7.8 billion. In 2003, the company’s annual revenue was just $272.2 million. Netflix reported a modest operating profit of $4.5 million, but it was also a very different business from where subscribers paid about $20 a month to rent unlimited DVDs. In today’s dollars, that would be the equivalent of about $33, which is more than what consumers pay today for a much more convenient streaming option.
At that point, a streaming service wasn’t even on the radar for Netflix investors. But Netflix was a promising growth company nonetheless, and if you had invested $2,000 in the stock today, your investment would have grown to over $1.1 million today.
Netflix still seems like a good buy for the long term, given its dominance in streaming. But at a price-to-earnings ratio of 43, the valuation becomes a bit high and investors should temper their expectations for future earnings.
Only on a list as impressive as this could Apple stock look disappointing. But it would still have turned an investment from 20 years ago into $470,000 today. That’s not a bad performance by any means, and it’s one that investors would certainly be happy with.
The game changer for Apple came in 2007 when it introduced the iPhone. That would ultimately become the catalyst that would lead to an entire ecosystem of products and services that generate billions in revenue for today’s business.
And if you had invested in the stock twenty years ago, you could not have predicted that at the time. It would have taken a bet on Apple and Steve Jobs to believe this could be the monstrous growth stock it has become. For the fiscal year ended September 25, 2004, Apple’s revenues were $8.3 billion and grew 33% year over year. It was profitable, but with a profit of only $276 million, the profit margin was just over 3%. Today, Apple generates nearly $400 billion in annual revenue, with profits typically exceeding $90 billion.
Like Nvidia, Apple is one of the most valuable stocks in the world. And with a still-growing ecosystem and loyal user base, it’s also an investment that could continue to increase in value over the long term, albeit likely at a much slower pace than in the past.
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*Stock Advisor returns November 4, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Apple, Netflix and Nvidia. The Motley Fool has a disclosure policy.
If you had invested $2,000 in each of these three growth stocks 20 years ago, you would have made $3.8 million. originally published by The Motley Fool
