Could $5,000 Invested in Nvidia Today Make You a Millionaire?
Key Points
Nvidia shares have been sliding since peaking in October.
You can buy the tech giant for less than 11 times next year's earnings, with a strong record of "beat and raise" quarters.
Sometimes opportunity knocks. Other times, it just knocks you out. Nvidia (NASDAQ: NVDA) shed its market cap crown two weeks ago, and the gap continues to widen. The leading maker of AI chips and other high-level computing solutions has shed nearly 30% of its value since peaking last month.
The stock is surprisingly cheap right now. With a critical earnings report now less than a week away, is this a good place for your next investment? Delivering on the headline that brought you here, can laying $5,000 on Nvidia now make you a millionaire?
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You probably know the answer. I have some hard truths if you don't.
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Investing is a marathon
Turning any $5,000 investment into a cool million will require patience. Nvidia stock would have to become a 200-bagger to hit seven figures. Put differently, Nvidia commands a market cap just above $4 trillion. There is only one other company on the planet with a higher price tag. Nvidia would have to top $800 trillion for a 200-bagger, and that is if Nvidia's share count doesn't increase over that time.
There is some good news on that front. Nvidia's been an aggressive buyer of its shares. It's been retiring more shares than it's been issuing for stock-based compensation or acquisitions. Its fully diluted share count is declining for the fifth consecutive fiscal year, a nearly 4% reduction over that time.
Nvidia is just getting started. Its board of directors recently announced a corporate record $150 billion in repurchase authorizations, boosting its buyback authorization to $235 billion. If Nvidia were to buy back $235 billion of its shares at current prices, it would reduce its share count by more than 5%.
Making a move
Nvidia is making a lot of money. Next week we might find out that Nvidia is making even more money. It wouldn't be a surprise. It's been fairly consistent in delivering "beat and raise" performances, even if the shares initially move lower on the strong financials.
You're here for the long haul if you're expecting a 200-bagger to turn $5,000 into $1,000,000. The stock is cheap enough to beat the market for here. Nvidia is trading for less than 11 times next year's earnings estimates, as back-to-back scandals weigh on CEO Jensen Huang. It's going to be an interesting earnings call on Nov. 17, that's for sure.
Even bears have to agree that a company growing its business at a 90% clip -- the way its guidance calls for revenue and earnings growth in its upcoming fiscal third quarter -- is a compelling value. Growth will slow. Nvidia's chunky margins will contract. It's still a good price for what has historically been a great company.
So, can Nvidia really turn $5,000 into a million bucks? It's not a realistic expectation unless you have a decades-long investment horizon. However, it's a great start at an opportunistic time. Investing $5,000 today and continuing to add to that position over time can get you there. It's not the answer you wanted, but it's the response you needed to hear.
Rick Munarriz has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.