How to Buy Nvidia Stock – A Beginner’s Guide

Nvidia (NASDAQ: NVDA), whose chips power artificial intelligence (AI) chatbots and other applications, sent major US stock indices to record highs on Feb. 22, a day after it posted bumper earnings for its 2024 fiscal year.

Fueled by the chipmaker’s strong performance and guidance that beat Wall Street analysts’ expectations, the S&P 500 had its best day in a year and closed at a record 5,087.03 and the Dow Jones Industrial Average gained 1.2%, closing above 39,000 for the first time. 

Nvidia’s earnings were seen as a test of whether the artificial intelligence enthusiasm that propelled tech and growth stocks in the past year has further to run.

Competitor Advanced Micro Devices (NASDAQ: AMD) and server component supplier Super Micro Computer (NASDAQ: SMCI) closed the day 10.69% and 32.87% higher, respectively, while British semiconductor and software design company Arm Holdings (NASDAQ: ARM) was up 4.7%.

Nvidia’s own shares jumped 16.4% to a record high of $785.38 because it said it expected first-quarter revenue to triple year over year, based on continued demand for its AI chips. Its market cap jumped $250 million, the biggest one-day increase by any stock in Wall Street’s history, to $1.94 trillion, beating the $196 million one-day jump by Meta Platforms (NASDAQ: META) earlier in February. 

Nvidia’s shares have since pushed higher. Its new all-time high is $950.02 it reached on March 25. The leap has investors wondering both whether they should buy Nvidia stock and how exactly to do that.

How to Buy Nvidia Stock via a Regulated Broker

If you’re wondering how you can buy Nvidia stock in the UK, investors are best placed to buy the chipmaker’s shares through a regulated broker. We recommend eToro because it is available in more than 140 countries and because of its zero-commission trades and low minimum trade sizes give more investors access to stock trading. The savings on zero commission trades can add up, especially for frequent traders or those investing smaller amounts.

etoro start page graphicWe also like eToro because it is easily understood by beginners. The platform is regulated by the UK’s Financial Conduct Authority (FCA), which requires that eToro make sure investments are safe and customers are treated fairly.

To open a brokerage account with eToro, go to etoro.com, then go to the site’s ‘Join Now’ page and enter your details, including your name and email, and set a password. After you read and understand eToro’s terms and conditions, cookie policy and privacy policy and click the boxes to accept them, you can hit the ‘Create Account’ button.

After you enter your information, you will be asked to verify your email address.

eToro profile graphic

 

Once you have an account, you can call up details on Nvidia on the eToro platform:

Nvidia eToro chart

 

Decide how much you want to invest in Nvidia, then deposit enough money into your eToro account to cover the trade.

Next, you need to choose what type of trade you want to make and how many shares you want to buy. 

You can place a market order, which is when you buy a stock at the best available price. Once you click ‘Open Trade,’ the order is filled right away. There are also ‘Out of Hours Orders’ that are executed as soon as the market opens, or in the case of extended-hours trading, at the next pre-market opening.

Or you can place a ‘Limit Order,’ which enables you to set a particular price you want to buy a stock at and the order will be filled if the stock reaches that price.

It’s important to note that zero commission applies to most stocks available on the eToro platform. For accounts under ASIC regulation, which is the Australian market watchdog, zero commission applies to all US stocks available on the eToro platform. Zero commission applies when investing in non-leveraged, buy stock positions. Zero commission does not apply to stock CFDs (contracts for difference).

The platform has a number of features that are great for beginners. Its copy trading platform allows you to copy the trades of other successful eToro investors. That can be especially useful to inexperienced investors who may want to replicate proven performers’ trades.

eToro also focuses heavily on social investing, enabling you to share ideas and discuss market trends with other investors, helpful toward staying informed about the markets.

It also offers a wide range of investment options to help you diversify your portfolio across asset classes to limit risk, including stocks, ETFs, cryptocurrencies, CFDs, and commodities. 

Is Nvidia a Good Investment?

Nvidia has paid off handsomely for investors over the past few years and based on its recent strong earnings report, is likely to continue to make money for its shareholders. If you had invested $10,000 in Nvidia stock 10 years ago, you would have roughly $1.5 million today, if you reinvested the company’s dividends into more Nvidia stock. Here are three reasons why it is a good investment:

It Has a Big Edge in GPU

Nvidia owns more than 80% of the graphics processing unit (GPU) market, according to Jon Peddie Research. GPUs were initially developed for high-end gaming consoles, but their ability to do parallel processing, when multiple calculations or processes are carried out simultaneously, make GPUs useful for AI, as well as cryptocurrency mining, scientific research, video editing, financial modeling and other applications.

GPU growth is expected to jump over the next three years, with one report saying that the market for GPUs is expected to expand at a compound annual growth rate (CAGR) of 4.18% between 2022 and 2026, reaching 5 billion units installed by the end of the period.

The following chart features Nvidia’s revenue and EPS growth compared to its share price trajectory:

Nvidia earnings and price chart

Consistently Strong Financial Performance

Over the past three years, Nvidia’s stock has taken off because of the company’s consistent revenue and earnings per share (EPS) growth. That trend appears to be accelerating. In fiscal 2024, the company pulled in $60.9 billion in revenue, more than twice what it produced in fiscal 2023.

Nvidia profit growth chart

 

In the fourth quarter of fiscal 2024 ended January 28, Nvidia had record quarterly revenue of $22.1 billion, up 265% year over year, and rising 22% from the prior quarter. EPS was $4.93, rising 765% from the same period a year ago, and up 33% from the previous quarter. Triple-digit year-over-year growth is a huge gain and while that may be difficult to sustain, it shows how well the company is doing. Nvidia’s gross margins have climbed from 62.3% a year ago to 76%.

Nvidia said the key driver for revenue growth was data center sales, which rose 409% year over year, to $18.4 billion.

The Company’s Innovation Will Help Expansion

Nvidia’s GPUs have uses in markets beyond data centers and gaming devices. Other applications include autonomous vehicles, robotics and healthcare. Last year, it spent $8.68 billion on research and development, up 18.2%.

“Accelerated computing and generative AI have hit the tipping point,” Nvidia CEO and founder Jensen Huang said in the fourth-quarter earnings release. “Demand is surging worldwide across companies, industries and nations.” Huang added that Nvidia’s data center platform sales increased because of the demand from large cloud-service providers, data processing, enterprise software and consumer internet companies is increasing.

Things to Consider Before Investing in Nvidia

Now that it seems everyone is investing in Nvidia, it may be smart to take a step back and look at what some observers see as signs of an unsustainable bubble for Nvidia’s share price.

Nvidia Is Trading at Incredibly High Valuations

As of mid-April 2024, Nvidia is trading at a price-to-earnings ratio of about 72, meaning it is trading at 72 times current earnings. While it’s a little less than the industry average P/E of 77, that’s still a quite a rich valuation.

If you look at another metric, Nvidia’a price-to-sales ratio (P/S) is about 35, while the industry average is just under 20. You can see how expensive the stock is, at least next to competitors, such as Advanced Micro Devices (NASDAQ: AMD), which has a P/S of about 11, Apple (NASDAQ: AAPL), with a P/S of about 7 and Intel (NASDAQ: INTC) with a P/S of 2.8, with Nvidia trading for three to 11 times their P/S ratio. 

All three competitors are ramping up the competition for high-performance graphics chips and have the ability to eat into Nvidia’s dominant market share. 

The Slowdown in Sales to China May Just Be Beginning

The US has blacklisted the sale of certain Nvidia chips to China on concerns they would have military applications. On Nvidia’s fourth-quarter earnings call in February, CFO Colette Kress said that data center revenue from China fell significantly in the quarter because of the licensing requirements.

China is a key market for the company and losing access to the country could cut significantly into revenue and force the company to adjust its business model. The impact of the ban has barely been felt yet as it came down this past fall. In the past, the company has said that 20 percent to 25 percent of its data center revenue comes from China. In the meantime, other competitors, not subject to the ban, could take market share from Nvidia there.

Nvidia Has a Head Start in AI Chips, but Competition is Coming

With the growth that Nvidia is seeing, it’s only common sense that other companies are working hard to take a portion of that growth. Advanced Micro Devices makes graphics cards as well and Intel just entered the discrete GPU market with its ARC series.

Apple also just began producing its own GPU chips for use in Macs, as part of its new M3, M3 Pro and M3 Ma series.

Does Nvidia Pay Dividends?

Nvidia has paid a dividend every quarter since late 2012. It cut its dividend from $0.16 to $0.04 in 2021 and it has stayed there since. The yield is quite low, owing mainly to the stock’s price appreciation, and is currently around 0.02%.

Is Nvidia Profitable?

The company has been profitable every quarter for more than 13 years, dating back to the second quarter of 2010.

Is Nvidia Over or Undervalued?

There are solid arguments that can be made for both sides. It’s a difficult question to answer because if you’re valuing the stock’s price based on its current earnings, it seems way overvalued, but looking at its potential earnings and prominence in AI applications, it may even seem ridiculously undervalued.

The stock’s P/E at 72 dwarfs the typical P/E ratio of the current average S&P 500 stock of about 25. But it is still below the industry’s average of 77. Despite the company’s huge rate of growth, some analysts think that that level of growth will be hard to maintain, especially considering that certain high expectations are already baked into the stocks’ price.

On the other hand, some analysts point out that its price-to-sales ratio of around 35 is not excessive, especially when we consider the revolutionary aspect of generative AI and that we are really only at the beginning of that trend. Nvidia owns a substantial moat in producing chips used for AI, so the companies that are going to invest in AI are likely to continue to turn to Nvidia over the coming years. It’s important to realize that the techniques used in making GPUs is not something another company can just copy. It’s an expensive process, so it will take time for competitors to catch up.

Other Ways to Invest in Nvidia

Besides the traditional method in going through a broker to buy shares in Nvidia, there are other ways to invest in the company:

Buy Nvidia Stock Through an ISA or IRA

There are certain tax advantages to buying Nvidia stock through an Individual Saving Account in the UK or an Individual Retirement Account in the US, but there are certain things that you have to consider before going down that route. If your ISA or IRA account is funded, you can enter Nvidia’s ticker (NASDAQ: NVDA) to find the stock, then choose the number of shares you want to invest, then the type of order, whether it be a market order for immediate purchase or a limit order at a specific price.

Remember there are limits to how much you can contribute to an ISA or IRA in a particular tax year. For example, in the UK, the yearly limit for contributing to an ISA is £20,000 for the tax year beginning in April. That is the total amount you can contribute across all your ISAs in a single tax year. In the US, the limit you can contribute to all of your IRAs in a given tax year is $7,000 for those under 50 and $8,000 for those 50 and older.

Also, make sure to understand any trading fees connected with buying Nvidia stock through the provider of your ISA or IRA.

Trade Nvidia Options

There are brokers that allow options trading. Some investors like trading options in Nvidia because the stock’s huge market cap makes it easier to get in and out of positions quickly. The stock is moderately volatile, which makes it easier to make money in options trading with the stock.

Options allow investors the right to call (buy) or put (sell) a stock at a specific price by a certain date. Options trading is generally for more sophisticated investors who can handle more risk than beginner investors.

Invest in ETFs With Exposure to Nvidia

Exchange-traded funds provide some built-in diversity for investors. There are several ETFs that have significant exposure to Nvidia, but balance their holdings out with other stocks. 

  • The VanEck Semiconductor ETF (NASDAQ: SMH) holds a large allocation of Nvidia stock at around 24% of its portfolio. It specializes in the semiconductor industry.
  • The Global X Robotics & Artificial Intelligence ETF (NASDAQ: BOTZ), which specializes in robotics and AI-related companies, dedicates nearly 19% of its holdings to Nvidia.
  • The Blackrock iShares Semiconductor ETF (NASDAQ: SOXX) has a broad exposure to the semiconductor sector, but about 9.6% of its holdings are Nvidia stock.

References 

https://www.reuters.com/markets/us/nasdaq-futures-jump-nearly-2-after-nvidia-trounces-expectations-2024-02-22/

https://www.jonpeddie.com/news/the-post-covid-black-death-is-over/?s=31

https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-fourth-quarter-and-fiscal-2024

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Jim Halley
Editor
Jim Halley
Editor

I am an experienced journalist who has also worked as an editor and writer at the Savannah Morning News, Salt Lake Tribune, USA Today, Stars and Stripes, and The Motley Fool. I spent the first half of my career in sports journalism, but in recent years have switched to writing about my other passion, stocks, particularly healthcare, real estate and consumer staples stocks. I've won numerous journalism awards from the Associated Press and state press associations and have been a judge for the Georgia Sportswriters Association. I've written one non-fiction book, Just One More Time, about Georgia Southern football, and…