1 Big Reason Why Today's Value Investors Won't Find Tomorrow's Nvidia
Nvidia’s stock has surged nearly 3,000% over the past five years, defying traditional value investing rules. Back in 2019, its high price-to-earnings ratio and modest profits made it seem overvalued to many investors. Yet its performance since then has forced a rethink of how growth and value interact in the market.
In 2019, Nvidia’s market capitalisation hovered around $100 billion, with a P/E ratio of 35. For value investors, this was too expensive—especially given limited profits at the time. Concerns also lingered about weak demand in virtual reality and hardware shortages, which later caused a dip in 2020.
But the company’s trajectory changed dramatically. Earnings per share grew even faster than its stock price, fuelled by explosive demand in AI, healthcare, and gaming. The pandemic and tech boom accelerated these trends, turning Nvidia into one of the best-performing stocks of the decade. Warren Buffett has long argued that ‘the very term *value investing* is redundant’—implying all smart investing is value-focused. He also noted that ‘growth is always a component in the calculation of value,’ suggesting investors must weigh future potential alongside current metrics. Nvidia’s rise proves this point: its early high valuation masked the massive growth ahead. To spot the next Nvidia, investors now face a balancing act. They must assess traditional metrics like P/E ratios while also judging a company’s long-term growth and profitability. Relying solely on past data risks missing transformative opportunities.
Nvidia’s success shows how growth and value can overlap in unexpected ways. A stock once deemed too expensive became a market leader by capitalising on AI and tech expansion. For investors, the lesson is clear: ignoring future potential can mean missing out on extraordinary returns.
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