A recession can seem like a bad time to invest in stocks. But if you’re willing to invest in growing businesses and hang on for the long term, it can pay off, significantly. Two excellent examples of that are Nvidia (NASDAQ: NVDA) and Super Micro Computer (NASDAQ: SMCI), also known as Supermicro.
If you had invested $25,000 into these stocks right after the Great Recession ended, 15 years ago, you would be sitting on some life-changing returns right now.
Nvidia: $8.9 million
It’s no secret that chipmaker Nvidia has been one of the best investments to have owned over the years. But what’s truly astounding is the magnitude of those gains. If you invested $25,000 into the stock back in July 2009, when the Great Recession had just ended, that investment would now be worth a staggering $8.9 million.
The bulk of the stock’s gains happened within the past few years when interest in artificial intelligence (AI) took off. Nvidia has become synonymous with AI as its chips are used heavily in developing AI models and software. Even with the stock’s recent dip in value, Nvidia would have made a phenomenal investment to hold over the long term.
Other tech companies may still be trying to figure out AI and how best to create models and make money from new products. And as they are doing that, in many cases, they are buying chips from Nvidia. And all that AI hype and excitement is visible just by looking at the company’s fast-growing financials.
In its most recent fiscal year, which ended on Jan. 28, the company’s revenue came in at just under $61 billion — more than tripling from the $16.7 billion it generated three years earlier. What’s even more impressive is its earnings growth, which has gone from $4.3 billion during that time to $29.8 billion this past year.
The AI revolution is still in its early stages, which is why investors remain bullish on the stock’s long-term prospects. It may not be too late to invest in Nvidia given its dominance in the AI chip market and data centers, but with a forward price-to-earnings multiple of more than 40 and investors becoming more wary of high-priced AI stocks of late, there could be some volatility in the near term, and investors will likely need some patience as it could take some time to earn good returns from buying the stock today.
Supermicro: $2 million
Supermicro stock has also generated some mammoth returns for investors. A $25,000 investment into the stock in July 2009 would now be worth around $2 million. When combined with the $8.9 million you could have made from Nvidia with the same size of an investment, your portfolio would be worth nearly $11 million by investing $25,000 into each of these two high-powered tech stocks.
As is the case with Nvidia, Supermicro’s valuation has been on fire due to AI over the past couple of years. The company is a big player in cloud and storage solutions. Its products are in high demand as businesses expand and grow their online offerings. Companies need to build the necessary infrastructure to accommodate next-gen AI products, and Supermicro’s servers and storage solutions help businesses accomplish that.
Back in fiscal 2020 (its fiscal year ends in June), Supermicro’s revenue totaled $3.3 billion. Now, however, even its quarterly revenue is higher than that. Business has been red hot for Supermicro and as companies continue to spend heavily on AI, the stock is sure to benefit from those developments.
The stock trades at a forward P/E of 17, which looks cheap for Supermicro given its impressive results. Despite its strong gains, this can still make for a solid investment to buy and hold right now.
Should you invest $1,000 in Nvidia right now?
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Investing $25,000 Into These 2 Stocks 15 Years Ago Would Have Made You Nearly $11 Million was originally published by The Motley Fool
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