Uncovering the Hidden Gem of Artificial Intelligence
As we navigate the ever-changing landscape of the stock market, one thing remains constant – the pursuit of exceptional returns. In 2024, the S&P 500 and Nasdaq Composite continued their upward trajectory, with megacap technology stocks leading the charge. However, amidst the giants, a smaller player stole the show, outperforming its peers by a significant margin.
The Rise of Palantir Technologies
Shares of data analytics firm Palantir Technologies (NASDAQ: PLTR) skyrocketed by 340% in 2024, making it the top performer in the S&P 500 index. While this impressive growth has led to a considerable expansion of its valuation, traditional metrics suggest that Palantir stock may be pricey and overbought at the moment.
A Superior Performer Emerges
But what about the long-term picture? According to data compiled by YCharts, semiconductor stock Nvidia (NASDAQ: NVDA) has been the top performer in the S&P 500 over the long run. With total returns of 2,130% over the last five years, 28,650% over the last 10 years, 32,990% over the last 15 years, and a staggering 82,830% over the last 20 years, Nvidia has consistently outperformed its peers.
The Power of Long-Term Investing
Warren Buffett once said, “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.” Holding onto Nvidia stock over the last two decades has been a wise decision, but it’s essential to recognize that long-term investing is key to achieving exceptional returns.
The AI Revolution
Nvidia’s critical role in the artificial intelligence (AI) space has fueled an epic period of prolonged buying activity, with shares rising by 171% in 2024 alone. Despite this unprecedented pace of valuation growth, Nvidia stock remains reasonably valued. The company’s net income and free cash flow are accelerating at a faster pace than its market value, making it an attractive buy for investors with a long-term time horizon.
A Reasonable Price Point
Nvidia stock trades at a forward price-to-earnings ratio of 31.7, nearly identical to where it was trading last year. With the company’s new Blackwell chip architecture poised to drive further growth in 2025, Nvidia’s profit margins are likely to continue expanding. As long as the current dynamic holds, Nvidia stock should remain fairly priced, making it a compelling buy for investors.
Expert Insights
Before making a move, consider the expert analysis from The Motley Fool’s Stock Advisor team. They’ve identified the top 10 stocks for investors to buy now, and Nvidia wasn’t one of them. With a proven track record of success, their guidance can help you build a portfolio that generates exceptional returns.
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