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I have a confession: I don't own it NVIDIA (LSE: NVDA) shares. In my defense, I'm British.
I have a lot of FTSE 100 stocks directly, but only invest in the US through trackers. That is one of the reasons why I don't have Nvidia, but there is another more important one.
When the ai chip maker's bandwagon started rolling last summer (I mean, really rolling), I decided I'd already missed my chance. Nvidia's stock price had skyrocketed and I thought: it can't go on like this.
It's my typical response to stocks with red-hot momentum. I'm afraid to get on board just as the wheels come off. As a result, I've missed a lot of excitement from Nvidia. tesla, amazon and the like.
<h2 class="wp-block-heading" id="h-i-need-to-stop-worrying-and-buy-growth-stocks“>I need to stop worrying and buy growth stocks.
It's time to rethink my attitude towards growth stocks. But I keep banging my head against the wall with the same question, only more so. Have I left it too late?
Nvidia stock is up 165% over the past year. In five years, they have shot up 2,195%. The company has a market capitalization of $3.3 trillion. It cannot continue to grow at the same rate; It would swallow the entire world economy.
Then there is your assessment. The stock now has a price-to-earnings ratio of 55.1. That's very expensive.
In comparison, the S&P 500The P/E is around 33 times (and most investors think it's expensive). However, Nvidia's profits continue to rise. They increased 94% year-on-year in the third quarter to $35.1 billion. Suddenly, Nvidia doesn't seem so expensive. Its forward P/E is just 30 times earnings.
A big draw is that Nvidia is not investing large sums of money in building ai infrastructure. He leaves that to others. It doesn't even make its high-performance graphics processing units (GPUs). This is outsourced to third parties such as Taiwan Semiconductor Manufacturing Company and Samsung.
I'm late to the party but I'll go anyway.
This makes it a capital-light business. On the other hand, it carries geopolitical risks. What happens if China invades Taiwan? Additionally, there are potential supply chain issues if these manufacturers cannot meet demand. Trade tariffs discussed by US President-elect Donald Trump could also cause disruption.
Nvidia also needs to continue innovating to maintain its leadership in GPU and ai chip technology. Furthermore, there is an underlying risk that the ai hype has been overblown.
stocks fell more than 6% on Tuesday (Jan. 7) amid a broader tech sell-off sparked by rising U.S. government bond yields. That wiped $220 billion off its market value. I'm struggling to understand that sum. So is this my buying opportunity?
The 50 analysts offering one-year Nvidia share price forecasts have come up with an average target of $174.6. If correct, that represents an increase of about 24% from today. That's pretty good, but it also shows how growth expectations are slowing.
Clearly I left it pathetically late to buy Nvidia. Although better late than never. I might stay for another dip, but who knows if we'll get one? So I will play it safe by investing a smaller sum and if the stock price declines I will buy more.
