Nvidia: A Dividend Hunter’s Retrospective

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The ascent of Nvidia (NVDA 3.40%) to a position of market leadership has garnered considerable attention. However, a retrospective examination reveals a trajectory punctuated by periods of modest returns and, for a considerable duration, a lack of definitive assurance regarding its ultimate success. This analysis, the second in a series, aims to delineate the company’s financial evolution and assess its implications for long-term investors.

Early Growth and Initial Volatility

Prior to the introduction of the GeForce 256 GPU in 1999, Nvidia’s revenue base was comparatively limited. The subsequent fiscal years, 1999-2003, witnessed a substantial increase in sales—a twelvefold expansion to $1.91 billion—accompanied by a profit of $91 million. This momentum continued through the decade, peaking in fiscal 2008 with revenues of $4.1 billion and profits approaching $800 million. However, the financial crisis of 2008 introduced a period of retrenchment. While research and development expenditures remained elevated, sales declined, resulting in net losses for both 2009 and 2010. It was not until 2017 that net income surpassed the 2008 high-water mark, a prolonged period of constrained earnings for shareholders.

Notably, during the period between mid-2003 and mid-2015, Nvidia’s total return, while positive, only marginally exceeded that of the S&P 500. This suggests that, for a considerable portion of its history, Nvidia failed to significantly outperform broader market indices, raising questions regarding the sustainability of its initial growth phase.

Recent Performance and Emerging Risks

Commencing in 2017, Nvidia’s foray into artificial intelligence-related technologies began to yield positive results. Revenues nearly quadrupled between 2017 and 2022, and net income increased almost sixfold. This translated into a substantial increase in share price, outperforming the S&P 500 by a considerable margin. However, the fiscal year 2023 witnessed a reversal of this trend. Sales growth stalled, and net income declined by over 50%, resulting in a significant correction in the stock price during the 2022 market downturn.

A contributing factor to this volatility was the initial overestimation of demand from the cryptocurrency market. As of four years prior, a considerable portion of GPU demand originated from crypto mining operations. The subsequent downturn in the cryptocurrency market led to inventory write-downs, negatively impacting Nvidia’s financial performance.

Current Momentum and Sustainability Concerns

Despite these challenges, Nvidia has recently demonstrated a remarkable resurgence. Key metrics over the past 12 months include:

  • Sales: $187 billion (representing a compound annual growth rate of 102% over the preceding two years and nine months).
  • Gross Margin: 70% (a 13 percentage point increase).
  • Operating Income: $110 billion.
  • Net Income: Approaching $100 billion.
  • Earnings Per Share: $4.06 (a 210% annual increase).

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This performance has been reflected in the stock price, which has increased by 1,180% compared to an 85% gain for the S&P 500. However, the critical question remains: can Nvidia sustain this rate of growth? Several factors warrant consideration. The current valuation multiples appear elevated, suggesting limited upside potential. Furthermore, increased competition from established players and emerging technologies poses a potential threat to Nvidia’s market share. A slowdown in the broader semiconductor market could also negatively impact the company’s performance.

The final article in this series will delve into Nvidia’s forward-looking expectations and assess its ability to meet shareholder expectations in the context of these evolving dynamics.

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2026-02-03 20:16