Single Stock Analysis: NVIDIA

Last week, we discussed how I personally don’t like investing in single stocks. There’s just simply not enough time in the average person’s day to analyze all the factors involved in order to play this game effectively. To drive the point home, it would be interesting to jump into a real-life example of how things can play out.

One of the real big “winners” as of late has been NVIDIA. What better company to analyze than the one everyone brings up when I advise them to stay away from single stock investing 🤪. For the record, anyone who has held on to this stock for the past few years is sitting pretty. That said, I don’t personally know anyone who bought this particular stock years ago and hasn’t touched it. Emotions tend to take the wheel on heavy market movers, which is exactly where you don’t want to be.

All graphs and screenshots used for analysis in this post come from Morningstar.com, which is an excellent tool for investors in many ways. I personally use it to look at the performance of index funds, but there are plenty of other cool aspects of the site, check it out!

Disclaimer: I am not a CFA, CPA, CFP, or a certified financial professional of any kind! Invest at your own risk.

Founded in 1993, NVIDIA has been an American software company for over 30 years. Originally their mission was to bring 3D graphics to video games and multimedia markets. Despite the competitive industry, NVIDIA performed quite well and was able to supply GPUs (or graphic processing unit) to most of the major video game console companies across the world.

More recently, NVIDIA was able to create products that would assist with the development of artificial intelligence. NVIDIA is currently supplying microchips for data centers to most of the tech giants we all know; like Google, Microsoft, Amazon and others. Still today, it appears to hold the majority of the market over its competition. It was the foresight of future needs, by NVIDIA, that has led to its extreme success.

Unless you have been living under a rock, you have heard how this tech company nobody has ever heard of has been making an absolute killing in the market. How do you even pronounce this damn company? Who cares! Invest now! Right?

Despite the reactive nature, it’s hard not to get intrigued by a chart that looks like this:

So, you get suckered in. AI is the future, this company appears to have relationships with all the big guns, I’m all in! Here we go!

Uh oh… what in the holy hell is going on?

On 1/6/25 NVDA closed at 149.43, on 2/3/25 it closed at 116.66. That is a 21.94% drop in your investment in less than a month! You decide this game is too much for you so you sell and take the loss. But oh look! Now its back up to 140.11 on 2/20, and then falls back down again to 120.15 on 2/27? 👀🙈

I’m not sure I can stomach this for very long, can you? Either way, why does NVIDIA seem to be heading in the wrong direction? Many attribute this recent fall to the success of a new player. DeepSeek, a Chinese tech startup, recently developed an AI at a significantly lower price point to consumers. Its inexpensive offerings to consumers could have led stockholders of NVDA to panic sell, which can drive down the stock price overall.

Is it time to buy NVDA now that it’s cheaper? Is it time to start looking at the suppliers to DeepSeek, maybe those guys are on the up? I haven’t the foggiest idea, and quite frankly, you probably don’t either. However, I do know that the S&P 500 will cleanse itself relatively regularly to ensure that I’m invested in the top 500(ish) American companies without me having to do anything, and that’s all I care about.

Brandon Ganch, The Mad Fientist, discussed on his podcast his experiences with single stock investing. He went over a few things, including the fact that he bought NVIDIA back in 2012.

The term, invest in what you know, comes to my mind when listening to this episode. “Back then I was a software developer, and I could see that graphics were going to be more important in future years,” Brandon said. This is what convinced him to invest in the company that made the best GPU. He ended up selling it later on (an unspecified date) and made 20%-25% on his original investment.

Based on what was said in the episode, we know that he bought in 2012, but he didn’t mention exactly when he sold it. For the sake of argument, and lack of specifics, let’s say he bought NVDA at .30 on 10/31/12, and then went on to sell it when it grew to .37 on 8/31/13 for a return of 20.90%.

Given that the S&P 500 has averaged 10% over the past few decades, a return of over 20% in less than a year is a phenomenal return by anyone’s standard!

Brandon said, “I thought I was a genius, it was a good investment.” Here’s the thing though… we all know where NVDA is today. “But had I not sold it,” Brandon goes on, “it would be up thousands of percent. So even though it was a success, there’s still a lot of regret there because I sold way too early.” Indeed he did…

So, if Brandon had indeed bought NVDA in 10/31/12, and held on to it over the turbulence of the past 12+ years, what would it look like today?

Originally buying at .30 per share on 10/31/12, NVDA stock is worth 124.92 as of 2/28/25. This would have been a return of 41,540%. 😶 In other words, if Brandon had put in $1,000 back in 2012, today it would be worth $415,400! 🙈

So even though by just about any standard, Brandon won, he still lost! It probably nags at him to this very day how much money he could have had! Lord knows it would bother me quite a bit! 😬

On this same podcast he discusses another situation on another single stock investment. This stock was growing so rapidly that it started to take over the majority of his portfolio (lack of diversification). He was also afraid to sell some of the stock because of the unrealized capital gains. Instead of waiting and seeing the investment start to diminish, Brandon pulled the trigger (for the sake of diversification) and got hit with some monster capital gains taxes.

Had Brandon, in this situation, decided to make this investment in his Roth IRA, there would have been no tax burden on selling the stock. Unfortunately for him, it was in a taxable brokerage account, and Uncle Sam showed up right in time to take a big chunk of his “gains” simply because Brandon was looking to keep his portfolio more diversified.

So, when you buy a single stock, and it goes down you lose. When you buy a single stock, and it goes up, you win… till you lose. Of course, tax loss harvesting can be utilized in an effort to combat capital gains tax, but that’s a tricky game to play. Even after that, are you going to pretend that missing out on a 41,540% return doesn’t bother you? If so, you have a thicker skin than most!

I am not saying all this to discourage anyone from investing, in fact, it’s quite the opposite. Investing in low-cost index funds is absolutely essential for wealth building. I love the VTSAX & Chill strategy for anyone who is still in the depths of the wealth building phase of their life. The argument has been made that this approach is not diversified enough, but for just about anyone who is half-way to FI, or earlier, this is a phenomenal strat.

Last week, I threw in a few caveats for single stock investing, the main one being that it should be done with 5% of your investable assets or less. Once you reach FI, I’d recommend most to keep the sum of your FI money in safer low-cost index funds, and feel free to invest the rest in whatever excites you the most!

Personally, if I have a large sum of money to gamble with, I’d rather be at the blackjack table getting free drinks and the rush of the scene. The thought of doing homework and looking at company performance each day doesn’t exactly give me the same thrill. But, hey, to each their own. 🤪

Stay classy Solos! ✌️