Stock Market

Time recently named Nvidia (NASDAQ:NVDA) CEO and founder Jensen Huang one of its 100 most influential people. If you invested $10,000 in NVDA stock in its 1999 IPO, it would be worth $8.5 million today.

Source: Hairem / Shutterstock.com

My guess if you’re one of these lucky shareholders is that you would also feel Huang is one of the most influential CEOs in America. I know I do. 

Here’s why.

NVDA Stock Has Split 5 Times

Nvidia’s IPO sold shares at $12. Since then it’s had five splits in June 2000 (2-for-1), September 2001 (2-for-1), April 2006 (2-for-1), September 2007 (3-for-2), and July 2021 (4-for-1).

A $10,000 investment in 1999 was good for approximately 833.33 shares. Today, you would have 40,000 shares, $8.5 million, and a compound annual growth rate of 34.5%.

How good is that? The S&P 500 has a compound annual growth rate of 5.8% over the same period.

How many CEOs do you know that have produced at this level for more than two decades? I can’t think of too many. 

In May 2018, I highlighted seven CEOs who were delivering for shareholders. One of the names on the list was Jensen Huang. I suggested at the time that the best was yet to come. 

Huang’s grown Nvidia from a tiny business with $1.2 million in annual revenue (1995) to $3.0 billion in net income, not revenue, in 2017,” I wrote on May 3, 2018.  

“While its growth over the past eight years has been significant, it’s entirely possible that growth over the next eight years will be even greater.”

Since I uttered these words, Nvidia’s trailing 12-month net income has grown to $7.1 billion, while its shares are up 265%, 199 percentage points greater than the S&P 500 over the same period. 

Over the past three years, here’s how the seven companies’ stocks have performed for shareholders.

Company 3-Year Annualized Total Return
Nvidia 47.0%
Amazon (NASDAQ:AMZN) 20.0%
Netflix (NASDAQ”NFLX) 16.4%
Stamps.com (NASDAQ:STMP) 12.2%
Insperity (NYSE:NSP) -1.6%
Abiomed (NASDAQ:ABMD) -3.1%
Lendingtree (NASDAQ:TREE)  -12.8%

Source: Morningstar.com

You can argue all you want about the secular trends that Nvidia’s been riding — artificial intelligence, gaming, autonomous driving, etc. — but in the end, Huang and Nvidia can only play the cards it’s dealt. 

It seems no matter the hand, Nvidia has an answer to keep growing its business. But, of course, that’s the kind of business you want to own in perpetuity.

 

Bold Moves Made With Confidence

As with all the names listed in Time’s 100 most influential people, someone else explains why they’ve made the list. In Huang’s case, it’s Andrew Ng, the co-founder of Coursera (NYSE:COUR) and several other tech-related initiatives. 

Ng discusses how Huang pushed Nvidia in 2003 to design GPU (graphics processing unit) chips to perform general-purpose computing tasks. While they are commonplace today, at the time, the move was met with some resistance from the chip industry. 

“Huang’s gamble paid off largely because he is among the world’s most technically savvy CEOs. He’s also a compassionate steward of his employees and a generous supporter of education in science and technology,” Ng writes. 

“With still?emerging AI technologies creating an insatiable hunger for more computation, Huang’s team is well-positioned to keep driving technological advances for decades to come.”

He is so right.

Imagine our world without GPUs? It’s impossible to comprehend. Huang didn’t invent the GPU, but he pushed Nvidia to make them do more, and because of that, Nvidia’s longtime shareholders have become very wealthy.

The Bottom Line

Page 60 of Nvidia’s 2021 proxy tells us that Huang’s pay in fiscal 2021 was 89x the median employee’s pay of $215,939. That might seem like a lot. However, when you consider that the average CEO-to-worker pay ratio for S&P 500 CEOs in 2020 was 299-to-1, it’s hard to argue with the man’s pay package.

Will there be periods of subpar performance from Nvidia stock in the future? Of course. No stock goes up in a straight line. 

However, as long as Jensen Huang is running the show, NVDA shareholders ought to feel pretty good about their chances to make money over the long haul.

He’s one in a million.    

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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