Nvidia Stock's 24-Year Journey: What A $1,000 Investment During IPO Would Be Worth Now

Nvidia Corporation NVDA shares have been on a tear this year, thanks to its exposure to artificial intelligence. The stock is the best-performing S&P 500 stock for the year-to-date period with a gain of about 114%.

Ahead of its quarterly results on Wednesday, here's a look at how profitable an investment in the stock at its 1999 initial public offering would have been now,

The Nvidia IPO: Nvidia went public on January 22, 1999, offering its shares at $12. The company raised $40 million in its IPO, giving the company a valuation of around $625 million. The company's market value has swelled since then and is currently at about $773 billion.

Nvidia's Businesses: Nvidia has grown from a graphics card designer to a leading technology firm with a diverse product portfolio. Its products have found use in a variety of applications, ranging from gaming and professional visualization to data centers and automotive.

Nvidia Stock Split: Over the years, Nvidia has undergone a stock split multiple times to make it more accessible to investors. The company had its first 2-for-1 stock split on June 27, 2000. It then had two more 2-for-1 stock splits on September 12, 2001, and April 7, 2006. On Sept. 11, 2007, the company announced a 3:2 stock split. The company most recently had a 4-for-1 stock split on July 20, 2021.

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Investment Returns: If an investor had put $1,000 into Nvidia at its IPO price of $12 per share, they would have initially purchased approximately 83.33 shares. Considering the five stock splits since then, the investor would now hold approximately 4,000 shares.

With the stock’s closing price at $312.64 on Friday, the value of the initial $1,000 investment would be worth approximately $1.25 million today. This represents a return on the initial investment of about 1,250% over the 24-year period.

In comparison, the S&P 500 Index would have fetched a return of around 226% over the same period.

A Beneficiary of the AI Revolution: Nvidia has long been recognized as a key player in the artificial intelligence space. The company’s GPUs are instrumental in training the neural networks of powerful AI models like ChatGPT, a large language model developed by OpenAI. As these AI models scale up and their use becomes more widespread, the demand for Nvidia’s technology is expected to grow significantly.

Nvidia’s CEO, Jensen Huang, has expressed optimism about the company’s position in the AI industry, emphasizing the democratizing potential of AI technologies like ChatGPT. Analysts have also highlighted the company’s potential, estimating that the rise of AI could represent a market opportunity in the multiple tens of billions of dollars annually for Nvidia.

Is Nvidia Overvalued? At the current stock price, Nvidia is valued at a forward price-earnings multiple of 63.29, a premium to the information technology sector's 24.7. The average price target for Nvidia stock, based on data compiled by TipRanks, is $296.29, which suggests over 5% downside from current levels.

Analysts, however, are upbeat about the company's fundamentals. KeyBanc Capital Markets analyst John Vinh said in a note on Monday that Nvidia represents one of the best-positioned companies in semis this year given due to its dominant positioning in generative AI and multiple new product cycles across both data center (H100) and gaming (RTX40).

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