Apple, Microsoft, and Tesla are not the best performing stocks in the S&P 500 index over the last 10 years – a fact that might surprise many investors. Indeed, the historical context plays a critical role in understanding stock performance. Analyst Charlie Bilello notes that the group of stocks leading the market can change dramatically depending on the time scale.
The best performing stocks in the S&P 500 over the last 5, 10, 15, and 20 years…
— Charlie Bilello (@charliebilello)
Over the last 10 years, semiconductor stocks like Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), and Broadcom (NASDAQ: AVGO) have taken the top three spots. Let’s delve into why these seemingly unexpected names have emerged as winners.
The Rise of Broadcom
AVGO Total Return Level data by YCharts
Broadcom, operational since 1991, is renowned for its contributions to computing and electronics, including the optical mouse sensor and infrared transceivers. The company experienced a metamorphosis in 2016 when it merged with semiconductor giant Avago Technologies, establishing a conglomerate with a presence across diverse tech segments.
Beyond this transformational merger, Broadcom made strategic acquisitions, including semiconductor device supplier CA Technologies for $18.9 billion in 2018, cybersecurity giant Symantec for $10.7 billion in 2019, and cloud computing software powerhouse VMware for a staggering $69 billion in 2023. VMware’s cloud software is pivotal for enterprises utilizing technologies like artificial intelligence (AI), enhancing computing infrastructure efficiency.
Broadcom reported a record $35.8 billion in revenue in 2023, and with VMware’s inclusion, the conglomerate anticipates a 40% revenue surge in 2024, reaching $50 billion. These moves position Broadcom to potentially sustain its stellar stock performance.
The Ascent of Advanced Micro Devices
AMD Total Return Level data by YCharts
Advanced Micro Devices is a leading designer of central processing units (CPU) and graphics processing units (GPU), powering the popular PlayStation 5 and Xbox Series X gaming consoles. AMD’s chips are also integral to Tesla’s electric vehicles.
However, AMD’s recent stock surge stems from its data center business, particularly the new MI300 series of chips tailored for AI workloads. With the MI300 series capturing major customers like Microsoft, Oracle, Meta Platforms, and potentially Tesla, AMD substantially raised its forecast for data center GPU sales from $2 billion to $3.5 billion in 2024.
Moreover, AMD boasts an estimated 90% share of the AI chip market for personal computers, with the Ryzen 7000 series CPUs enabling on-device AI workload processing and driving a remarkable 62% revenue increase in the client segment during the last quarter.
The imminent release of next-generation Ryzen AI chips promises a performance leap that could be thrice as powerful as their predecessors.
Nvidia’s Dominance in AI and Personal Computing Set to Drive Record 2024 Performance
Nvidia: A Decade of Unparalleled Stock Performance
Nvidia has secured its position as the best-performing stock of the last 10 years, boasting a monumental gain of 17,900%. An initial investment of $1,000 in the company a decade ago would have ballooned to an impressive $179,000 today. This unparalleled growth trajectory has set the stage for the company’s most promising year yet in 2024.
Achieving Unprecedented Financial Milestones
In the recent fiscal 2024 third quarter, Nvidia’s data center revenue skyrocketed to a record-high $14.5 billion, marking an extraordinary performance. Anticipation is high for another record-breaking quarter, with the company’s fiscal 2024 fourth-quarter results, scheduled for release later this month, expected to maintain the trend of unprecedented success. The company’s anticipated revenue of $58.8 billion for the full fiscal year would signify a remarkable 1,323% growth over the last decade, affirming the substantial gains in its stock price.
The Path to Continued Success
Nvidia’s new H200 chip, slated for release midyear, is capturing investors’ attention. With the promise of up to double the performance of its predecessor in inferencing and consuming half the energy, this innovation is poised to revolutionize data center operations and solidify Nvidia’s market leadership. While the company’s exponential growth is bound to level off eventually, analysts are still optimistic, projecting a 58% increase in revenue and a 69% increase in earnings per share for the upcoming fiscal 2025 year.
Positioned for Growth in the AI Era
The bright forecast for Nvidia is reinforced by the immense potential of the AI industry, which is expected to contribute trillions to the global economy in the next decade. Despite looming competition, Nvidia’s data center chips remain the benchmark, positioning the company for further upside in its stock price in the years to come.
Investment Considerations
Before making an investment in Nvidia, it’s crucial to weigh the analysis from the Motley Fool Stock Advisor analyst team, who have identified the 10 best stocks for investors to buy now, with Nvidia not included in this exclusive list. The Stock Advisor service, known for providing an easy-to-follow path to investment success and outperforming the S&P 500, presents a compelling alternative for investors seeking a diversified strategy.
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