Here's How Much Money You'd Have if You Invested $10,000 in Nvidia a Decade Ago

Nvidia (NASDAQ: NVDA) has been one of the best stocks to own for some time, and it was right under many investors' noses for a while. Nvidia makes graphics processing units (GPUs), which were originally intended for gaming graphics but quickly found many more use cases.

Most of Nvidia's rise over the past decade has been tied to this alternative use, with the largest boost coming from Nvidia GPUs being the best option for training artificial intelligence (AI) models. So, how much money has Nvidia made investors with a fairly modest investment size? A life-changing amount.

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Nvidia was a true millionaire-maker stock

If you invested $10,000 into Nvidia a decade ago, that would be worth nearly $3 million now.

NVDA data by YCharts

That's an unbelievable run, and anyone who invested in Nvidia and held shares over the past decade couldn't be happier. But what if you invested two decades ago, in 2005? That same $10,000 would be worth $7.6 million.

Those are incredible returns that everyone wants. The problem is that in order to get those returns, investors had to hold the stock through some grim times.

Focusing on the past decade, Nvidia's stock fell around 25% from its all-time high four separate times. Additionally, it was down more than 50% twice. The chart below shows how far off Nvidia was from its all-time high during the past decade and the large drawdowns investors had to deal with.

NVDA data by YCharts

Going through those drawdowns isn't easy, and I don't fault investors for selling during them. However, it should serve as a lesson that to get the best returns, you'll also have to deal with some hard times.

For Nvidia, both of the major drops were caused by cryptocurrency crashes. One of the use cases for Nvidia GPUs is mining cryptocurrencies, and when the prices of various digital currencies collapsed, so did the demand for its GPUs. This caused an inventory surplus for Nvidia, which then had to discount its GPUs heavily to be sold while the demand for its product was already low.

However, long-term investors recognized that these crashes were short-term problems, as the inventory issue would be worked out eventually.

This is something to keep in mind, as another event like this could occur eventually.

Nvidia may not experience large demand drops again

The largest use case for Nvidia GPUs right now is AI model training. Should we reach a point at which companies acquiring Nvidia GPUs to train their AI models have all the computing capacity they need, there could be a similar stock crash as experienced in 2018 and 2022 because Nvidia wouldn't have near the demand. That will be another dark year for Nvidia's stock, as it will likely crash.

However, GPUs are starting to be interwoven into the day-to-day operations of using these AI models, so as long as AI use is growing, demand for Nvidia GPUs will be there. Furthermore, GPUs don't last forever. Common estimates place the life of GPUs in a data center from one to three years. That means all the GPUs Nvidia is selling right now will need replacing as they burn out. Because these GPUs are being utilized on a near-constant basis, they burn out much faster than a GPU used in a computer that is used for a few hours of the day.

With these GPUs being an integral part of the AI ecosystem, Nvidia may not see as massive a drawdown as it has in years past when GPU demand drops. This bodes well for shareholders and means that investors can still take a position in Nvidia's stock today without fear of a crash like the one it experienced in 2018 and 2022.

Nvidia is still a great investment now, as there is still massive and growing demand for its GPUs. While investors don't have access to a time machine to go back and capture the returns from a decade ago, the future still looks bright for Nvidia stock.

Should you invest $1,000 in Nvidia right now?

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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.