Can Nvidia Sustain Its Parabolic Growth? A Historical Look at the Stock Market

The excitement of watching a stock you own skyrocket is unparalleled. Nvidia is currently the poster child of vertical ascent, with its stock soaring to incredible heights. If you are a Nvidia stockholder, congratulations are in order. However, the burning question remains – will this hot streak continue?

Looking at historical data of past winners may shed some light on the likelihood of Nvidia’s streak lasting. Five years ago, Nvidia’s stock was $37, and today it trades at $891, marking over a 2000% gain compared to 83% for the S&P 500. The past two years have been particularly impressive for Nvidia, with the chip-stock accelerating even further since the start of 2024.

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To determine whether hot streaks persist with high-octane stocks, analysts screened 12-month periods going back 20 years. The goal was to select stocks that had surged at least 200% during one of these years and observe their performance in the following year. The results were surprising and disheartening to investors highly bullish on surge-extensions into the second year.

The analysis revealed scant evidence that outstanding stocks continue their upward momentum in the second year. However, neither are they more likely to fall in the second year. Earnings growth emerged as a significant factor correlating with high returns in the second year. Stocks that outperformed the S&P 500 in the following year showed a strong correlation between earnings growth and high returns.

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As for Nvidia, the 2024 and 2025 calendar year estimates for the company are promising, with expectations of roughly doubling earnings. While this may suggest a safe investment, it is essential to consider whether the market has already priced in this growth. For a super-charged stock like Nvidia to continue performing well, it needs to outearn or out-grow even the most optimistic estimates.

In conclusion, the statistics and historical data outlined above offer valuable insights into the world of stock investments and the importance of considering factors like earnings growth. Staying informed and making informed decisions based on data and analysis can help investors navigate the unpredictable stock market and potentially reap the rewards of high-performing stocks like Nvidia.

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