A recession may seem like a bad time to invest in stocks. But if you are willing to invest in growing companies and stick with it for the long term, it can pay off significantly. Two excellent examples of this are Nvidia (NASDAQ: NVDA) And Supermicrocomputer (NASDAQ: SMCI)also known as Supermicro.
If you had invested $25,000 in these stocks 15 years ago, just after the Great Recession, you would have made a life-changing return today.
Nvidia: $8.9 million
It’s no secret that chipmaker Nvidia is one of the best investments you’ll have in years. But what’s truly astonishing is the size of those gains. If you had invested $25,000 in the stock in July 2009, just as the Great Recession was ending, that investment would now be worth a staggering $8.9 million.
Most of the stock’s gains have come in the past few years as interest in artificial intelligence (AI) has grown. Nvidia has become synonymous with AI, as its chips are widely used in the development of AI models and software. Even with the recent drop in the stock’s value, Nvidia would have been a phenomenal investment to hold for the long term.
Other tech companies may still be trying to figure out AI and how best to model and monetize new products. And as they do, in many cases they’re buying chips from Nvidia. And all that AI hype and excitement is visible just by looking at the company’s rapidly growing financials.
In its most recent fiscal year, which ended on January 28, the company’s revenue came in at just under $61 billion, more than tripling the $16.7 billion it generated three years earlier. Even more impressive is its profit growth, which has jumped from $4.3 billion in that period to $29.8 billion last year.
The AI ​​revolution is still in its infancy, which is why investors are still optimistic about the stock’s long-term prospects. It may not be too late to invest in Nvidia, given the company’s dominance in the AI ​​chip market and data centers, but with a forward price-to-earnings ratio of over 40 and investors becoming more cautious of expensive AI stocks of late, there could be some volatility in the near term and investors will likely need to be patient, as it could take some time to make a good return by buying the stock today.
Supermicro: $2 million
Supermicro stock has also generated huge returns for investors. A $25,000 investment in the stock in July 2009 would be worth about $2 million today. Combined with the $8.9 million you could have made with Nvidia for the same size investment, your portfolio would be worth nearly $11 million by investing $25,000 in each of these two powerful tech stocks.
Like Nvidia, Supermicro’s valuation has skyrocketed in recent years thanks to AI. The company is a major player in cloud and storage solutions, and its products are in high demand as companies expand and grow their online offerings. Companies need to build the infrastructure to house the next generation of AI products, and Supermicro’s servers and storage solutions help companies do just that.
In fiscal year 2020 (the fiscal year ends in June), Supermicro’s revenue totaled $3.3 billion. Now, however, even the quarterly revenue is higher than that. Business is good for Supermicro and as companies continue to spend a lot of money on AI, the stock will certainly benefit from those developments.
The stock is trading at a forward P/E of 17, which looks cheap for Supermicro given its impressive results. Despite the strong earnings, this could still be a solid investment to buy and hold now.
Should You Invest $1,000 in Nvidia Now?
Before you buy Nvidia stock, here are some things to consider:
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Investing $25,000 In These 2 Stocks 15 Years Ago Would Have Made You Nearly $11 Million was originally published by The Motley Fool
