Buying solid companies and holding on to their shares for a very long time is a proven way to make money in the stock market, as this simple strategy helps investors take advantage of the power of compound growth and also capitalize on disruptive and secular growth opportunities.
Nvidia (NASDAQ: NVDA) is a prime example of what a successful buy-and-hold investment can deliver over the long run. An investor who put $10,000 into Nvidia stock a decade ago and held on would be sitting on a position worth more than $1.8 million right now and more than $1.9 million with dividends reinvested.
NVDA Chart
But can Nvidia replicate this feat and help new investors become millionaires if they start with a $10,000 investment?
Is it realistic to expect such massive gains from Nvidia again?
Nvidia has grown by leaps and bounds over the past decade, and now, with a market cap of just over $2.25 trillion, it’s the third-largest company in the world. So for Nvidia to grow by 100 times from here, its market cap would have to exceed $200 trillion. That looks absurd: Last year, the entire global gross domestic product (GDP) was an estimated $105 trillion, up just 5% from 2022.
Nvidia’s market cap, therefore, is equivalent to about 2% of the global GDP. If it maintained that proportion over the long haul, it would be worth $200 trillion when the world economy had grown to an almost incomprehensibly large $10 quadrillion. That may not happen in our lifetime — global GDP has grown by between 2% and 5% a year since 1980 in most years, except during the 2008-2009 recession and at the onset of the pandemic in 2020.
Assuming the global economy grows at an optimistic 5% a year, it would take more than nine decades for it to grow to $10 quadrillion. We can’t know if Nvidia will even be around then. However, going by the company’s prospects and the multiple markets that it serves with its graphics processing units (GPUs), there is a good chance it could turn out to be a solid long-term bet — even if it’s unlikely to turn a $10,000 investment into a million-dollar position again in our…
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