Nvidia has seen significant growth, with a 174% return in 2024 and a market capitalization increase from $1.2 trillion to $3.3 trillion. This has led to the company accounting for over a third of the S&P 500’s gains this year. As a result, the average S&P 500 stock has underperformed, making it challenging for investors without Nvidia exposure to beat the market.
Despite concerns about Nvidia’s valuation, the stock has actually gotten cheaper over the last five quarters, with earnings per share outpacing share price appreciation. Furthermore, Nvidia is expected to continue growing, with a PEG ratio that is cheaper compared to other mega-cap stocks like Apple and Microsoft.
While some argue that Nvidia’s success is fueled by an artificial intelligence (AI) bubble, historical comparisons show that valuations are not as inflated as during the dotcom crisis. Additionally, the Gartner Hype Cycle suggests that the market is experiencing normal fluctuations.
Investors are advised to diversify their portfolios and consider owning an S&P 500 index fund to match market returns. While Nvidia may not be the best investment for everyone, analysts believe that exposure to AI technology is justified, with Nvidia being a key player in this space.
In conclusion, investors should be cautious when considering Nvidia and focus on long-term growth prospects. Diversified portfolios, including exposure to an S&P 500 index fund, can help mitigate risks associated with individual stock performance. Ultimately, making informed investment decisions based on research and market trends is essential for success in today’s volatile market landscape.
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https://finance.yahoo.com/news/nvidia-stock-174-thats-big-091200110.html