Another year, another huge win. That’s what it seems to be heading towards Nvidia (NASDAQ: NVDA). The GPU maker’s shares have soared with just a few weeks left in the year.
It’s too late for investors who don’t own Nvidia to benefit from the stock’s past performance. But should you buy Nvidia stock outright before the end of 2024? This is what history suggests.
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There is often no reason to rush into buying a share. In many cases it does not matter much whether you buy shares immediately or a few months later. With Nvidia, however, it was a different story.
The company made its initial public offering on January 22, 1999. In the nearly 25 years since, Nvidia has achieved positive first-quarter returns 20 times. The stock’s average first-quarter gain is a whopping 19%. If you had waited until after the beginning of the year, you would usually have been poorer.
In 14 of Nvidia’s 25 full first quarters since its IPO, the stock has delivered double-digit percentage gains. The most impressive performance came last year when Nvidia’s stock price shot up 90%. But the first quarter of 2024 ranks as the stock’s second-best Q1 performance ever, with a massive 82.5% gain.
Admittedly, Nvidia posted some dismal Q1 performances. In the first quarter of 2008, the stock fell about 42%. However, over the past decade, Nvidia has only experienced one negative first quarter, with shares down about 7% in the first quarter of 2022.
Of course, most investors aren’t going to buy Nvidia stock before the end of a given year and then sell them three months or so later. How has the stock performed over longer periods?
Nvidia delivered positive returns in 17 of the 23 three-year periods since the company’s IPO (including the period between 2022 and 2024). The average return over these three-year periods was around 195%.
But if you bought before the end of a given year and held the stock for five years, you’d be really good. Nvidia’s stock price has risen in 19 of the 21 five-year periods since its IPO. The average return over these five-year periods was no less than 551%.
From a historical perspective, what is the bottom line when it comes to buying Nvidia stock before the end of the year? It almost always pays off handsomely.
Now for the bad news: There’s good reason to believe that history doesn’t matter much when it comes to investing in Nvidia. Why? The present is different from the past.
Most of Nvidia’s great achievements in previous years came before the generative AI explosion. Interest rates were also much lower during the period when Nvidia posted its biggest gains. Rivals are rushing to develop chips that compete with Nvidia’s GPUs. The stock’s future returns could be significantly lower in the future as supply of AI chips catches up with demand, interest rates remain higher (relatively speaking) and competition intensifies.
However, there’s also an argument that Nvidia’s future could be even brighter than its past. CEO Jensen Huang believes the company’s new Blackwell GPU architecture could become the most successful product not only in Nvidia’s history, but in “the history of computing.” Importantly, Nvidia is now launching new chips annually, so even more powerful GPUs will be on the way after Blackwell.
AI is only in its early stages. New developments, possibly including artificial general intelligence (AGI), could fuel Nvidia’s growth like never before. Even if we eliminate AI altogether, the business could have a $1 trillion opportunity as organizations move from general computing to accelerated computing.
If you think Nvidia’s growth prospects will improve (and there’s a good reason for that), throw away the history books: buying these stocks out of hand before the end of the year makes perfect sense.
Consider the following before buying shares in Nvidia:
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Keith Speights 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.
Should You Handover Nvidia Stock Before the End of 2024? This is what history suggests. was originally published by The Motley Fool
