Last updated: July 4th, 2024
As the world’s leading supplier of graphics processing units (GPUs) used to power advanced AI models, Nvidia has capitalised on the rise of ChatGPT and a host of other enterprise applications powered by artificial intelligence (AI).
Five years ago, Nvidia’s market capitalisation was below US$100 billion.
In March 2024, its valuation passed US$2 trillion, and in recent weeks, it reached a valuation of US$3.34 trillion, ahead of Microsoft [MSFT] and Apple [AAPL].
As one of the world’s biggest companies, alongside Microsoft and Apple, Nvidia has provided shareholders with outsized returns — but is it too late to buy Nvidia, and how do you invest from Australia?
Above: Performance of the S&P500 and the All Ords in contrast with the rocketship-like rise of Nvidia. Zoom out for better long-term context.
How Has Nvidia Stock Performed?
Nvidia was first listed on the Nasdaq stock exchange in January 1999 under the ticker symbol NVDA, at US$12 per share.
Increased retail investor inflows into the stock market starting in 2020 collectively lifted US share markets, but investment has been especially concentrated in the largest tech players, dubbed the Magnificent Seven.
(Meta, Microsoft, Alphabet, Apple, Amazon, Tesla, and Nvidia).
The NVDA stock price surged to over US$1,000 per share for the first time in May 2024, and lifted in early June on the back of plans to launch a new AI chip called Rubin in 2026.
Nvidia’s share price was slightly over US$1,208 before the 10-to-1 stock split enacted on Monday, June 10. The split was designed to “make stock ownership more accessible.”
Did You Know?
A 10-to-1 split means shareholders receive nine additional shares for every share held, and the trading price of the company’s shares are divided by ten.
Its fourth-quarter sales data released in February this year showed a 400% year-over-year increase in its data centre business, which includes the company’s leading AI chip, the H100 graphics card.
The chipmaker posted record revenue of US$260 billion in May, up 18% from the previous quarter, and up 262% from the previous year.
Will more affordable NVDA shares following the stock split and solid revenue projections encourage even greater investor interest in the second half of 2024?
According to S&P Dow Jones Indices senior analyst Howard Silverblatt:
Important!
The company also raised its quarterly cash dividend by a whopping 150%, from $0.04 per share to $0.10 per share — equivalent to $0.01 per share post-split.
Nvidia [NVDA] Stock Performance Metrics To Watch.
Here are some key facts about Nvidia’s performance as of June 28, 2024:
| P/E Ratio | 72.19 |
| PEGY Ratio | 1.69 |
| 1-Year Return | 193.19% |
| Shares Outstanding | 24.6B |
| 30-Day Average Volume | 433,336,608 |
Nvidia’s History, Leadership and Price Predictions.
Founded in 1993 by Jensen Huang — who still leads the company today — Nvidia’s invention of the GPU initially supercharged the gaming sector.
However, the company has come into its own since the widespread pursuit of generative AI projects.
The buzz around Nvidia and its founder is palpable, and it’s no doubt partly fuelling the company’s strong valuation.
(Related: 15 Best Stock Trading Apps In Australia).
Meta CEO Mark Zuckerberg recently described Huang, who’s often pictured wearing a leather jacket, as “Taylor Swift, but for tech.”
Important!
Some experts warn the recent growth in tech stocks is a bubble set to burst, while others see it as the nascent stages of a period of significant opportunity for growth.
In an opinion piece for The Sydney Morning Herald, William Bennet warns investors from buying NVDA from a ‘fear of missing out’ (FOMO) rather than a genuine understanding of the company:
Barron’s Big Money poll of 120 US investment professionals released in May 2024 found:
- 43% feel the market is overvalued, with Nvidia and Tesla the most overvalued stocks.
- 53% were bullish on US equities in the coming 12 months.
- Technology and energy sectors were the favourites to post solid growth in 2024.
In response to Nvidia cracking the US$3 trillion market cap, Bloomberg TV anchor Caroline Hyde said:
Although, Hyde also points to three factors that could shift Nvidia’s dominance:
- Not being able to control the broader ecosystem of hardware, software and services, as well as a potential slow-down in demand for AI processing infrastructure once AI’s large language models move from the training phase to the implementation phase.
- Customers becoming competitors. Other tech giants like Alphabet, Microsoft and Apple that are core buyers of AI chips are also in works to develop their own.
- Investors taking profits and redirecting their money to different companies with sustainable future revenue growth.
Data analysis from Live Data Technologies shows how other established tech companies are building their talent base to compete with Nvidia.
Above: Chip and semi industry as a % of new hires in 2024.
How To Buy Nvidia Shares In 4 Steps.
Before you go all-in on Nvidia, it’s important to note that stock picking and timing the market is hard. Gains are made through an increase in the share price when you sell at a future date.
Given that Nvidia’s share price is already high, you won’t be buying in low.
Of course, you can still buy during temporary dips in the share price — but depending on how long you plan to hold your Nvidia shares, you’ll need to feel confident its price can keep rising.
It’s doubtful that Nvidia’s meteoric rise can continue indefinitely, but it’s unclear whether a major correction is imminent or if the company can maintain a steady growth trajectory.
Once you’re certain you want to add NVDA to your portfolio, follow this approach to using share trading apps:
1. Know The Intricacies Of US Share Ownership.
There’s a key difference between direct ownership of company shares in Australia and holding US shares.
Australian brokers may offer CHESS-sponsored shares, where you legally own the stock and your ownership details are registered with the Australian Securities Exchange (ASX).
A custodian company maintains ownership of the shares on your behalf—but you retain all beneficial rights. With a custodial broker:
- You receive all the returns from capital gains or dividends on your shares.
- You’re in control of when you sell your shares.
- You may get access to features like fractional investing, to buy part of a NVDA share.
Important!
Insolvency of brokers/custodians is a risk under the custodial model, so it pays to choose a broker that’s reliable, established and potentially, headquartered in Australia.
There will also be added tax obligations if you invest in Nvidia. You’ll need to:
- Pay a 15% US withholding tax on dividend earnings from your NVDA shares.
- Pay Australian tax on returns from NVDA stock when you report your income.
Check with your accountant if you’re eligible to claim a foreign income tax offset
3. Pick The Best Share Trading App For US Markets.
Stockbroking apps vary in terms of their features, markets, and pricing models, so take some time to compare the options.
Cost should be a core consideration, as fees reduce your overall earnings from investing.
To cost-effectively invest in Nvidia shares, you’ll need a brokerage app that:
- Supports US markets and the Nasdaq stock exchange in particular.
- Has competitive foreign currency exchange fees in addition to cheap brokerage costs.
Did You Know?
You can verify a broker is ASIC-registered by looking for an Australian Financial Services (AFS) Licence number on their website, and then checking it’s legitimate via ASIC Connect.
Like any app, you’ll need to provide personal details to create your account, but there are some additional KYC (Know Your Customer) requirements. You may need to provide:
- Your name, contact details and date of birth.
- Your tax file number (TFN).
- Official identity documents that can be verified.
- Your bank account number for depositing and withdrawing money.
- A completed W-8BEN form which is required by the U.S. authorities.
Important!
Make sure you complete a W-8BEN form to cut your US tax burden in half from 30% to 15%. The process for completing and submitting this form varies between different brokers.
4. Add Funds And Execute Your Buy Order.
With access to an online brokerage account, you can place an order for NVDA shares at any time. Follow these steps:
- Add money into your account via your bank or card to cover your investment amount and fees.
- Find ‘NVDA’ or the ticker symbol of the ETF/fund you want through the search tool.
- Review the Nvidia share price listed within the app to ensure it’s as expected.
- Enter the amount you want to invest or the number of shares you want to buy.
- Select an order type. Either buy instantly at the current market price or set limit or stop-loss orders to delay the purchase of your NVDA stock until a certain price point is reached.
- Click ‘buy’ to proceed with your order—expect the transaction to be settled within a few days.
Your FAQs About NVIDIA Stock, Answered.
Consider these facts before you become a Nvidia investor.
What ASX-Listed ETFs Hold NVDA?
Exposure to Nvidia shares can be gained through several exchange-traded funds (ETFs) listed on the Australian Securities Exchange (ASX), such as:
- Global X Semiconductor ETF (ASX: SEMI). Nvidia is the largest holding with a 13.01% weighting.
- Global X US100 ETF (ASX: N100). Nvidia is the largest holding with a 10.78% weighting.
Does Nvidia Pay Dividends?
Yes, Nvidia pays dividends. Nvidia’s next dividend payment date is on Jun 28, 2024.
Should You Buy Nvidia Stock?
So far, Nvidia seems to be living up to the hype, but it’s uncertain how AI innovation will progress and what that means for the company’s earnings growth.
Expectations from NVDA investors may be outpacing the fundamental value on offer, especially if the US economy doesn’t remain robust.
While the NVDA share price has increased dramatically in recent years, the AI-driven hype has yet to be validated with widespread real-world, profitable adoption of AI-powered applications.
With escalating AI training costs and growing discontent among creatives about how IP is being exploited, AI—and AI stocks—are not a sure thing.
Jody
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