The world has transformed in countless ways over the last decade, reshaped by new social trends and innovative technologies. During that time, three of the most prolific changes have been the rise of e-commerce, cloud computing, and artificial intelligence. All of these have simplified or improved life in some way, and they have created immense wealth in the process.
In fact, if you had purchased $10,000 worth of stock in either (or both) Amazon (AMZN +3.47%) and NVIDIA (NVDA +4.30%) just 10 years ago, those shares would now be worth over $186,000 and $284,000, respectively. In both cases, those are life-changing gains -- but here's the best part: These stocks still look like good investments today. Here's why.
Image source: Getty Images.
1. Amazon: The retail disruptor
When Amazon's founder and CEO Jeff Bezos penned his first letter to shareholders back in 1997, he highlighted the core of the company's growth strategy: obsess over customers. To that end, Amazon pioneered customer reviews as a way to help online shoppers make informed purchases.
At the time, that was a highly controversial decision. According to Bezos, he received letters from publishers stating: "You don't understand your business. You make money when you sell things." Those letters even demanded that he remove the reviews, but he didn't listen.
Bezos understood the importance of customer satisfaction. And that led him to make Amazon one of the most customer-centric businesses in the world. As a result, the company has captured mindshare and market share in high-growth industries like e-commerce, cloud computing, and digital advertising. That breadth and scale give Amazon a big advantage over the vast majority of its rivals, and it has translated into incredible financial performance.
|
Metric |
2015 |
2020 |
CAGR |
|---|---|---|---|
|
Revenue |
$107.0 billion |
$386.1 billion |
29% |
|
Free cash flow |
$6.7 billion |
$25.9 billion |
31% |
Data source: Amazon SEC filings. CAGR = compound annual growth rate.
Despite its size and past success, Amazon still has growth opportunities. More consumers shop online and more businesses move to the cloud each year, and those trends aren't going to reverse. The company is also rapidly gaining ground in the digital ad market. In fact, Amazon just signed an exclusive deal with the NFL to bring Thursday Night Football to its Prime Video service in 2023. That should translate into more ad dollars for the business.
Furthermore, Amazon's days as a disruptor may not be over. For instance, the company has built an extensive logistics network, which now consists of over 185 robot-powered fulfillment centers and a growing fleet of delivery planes, drones, tractor-trailers, and vans. This helps the company support merchants and consumers with fulfillment services and fast shipping, but it could also allow Amazon to compete against logistics giants like FedEx and UPS as a third-party carrier.
The takeaway is this: Despite being a $1.5 trillion enterprise, Amazon still has the potential to grow its business. More importantly, its deep pockets and focus on customer satisfaction should give the company an advantage in almost any market.
2. NVIDIA: The data center disruptor
In 1999, NVIDIA revolutionized the gaming industry with the invention of the graphics processing unit (GPU). These chips were designed to deliver stunning graphics by processing lots of data very quickly, differentiating them for central processing units (CPUs), which can only handle a few operations at once.
Image source: NVIDIA.
Incidentally, the ability to perform thousands of calculations simultaneously also means GPUs are ideal for accelerating data center workloads, especially computing-intense applications like artificial intelligence. And while competitors like AMD have also developed GPUs, NVIDIA's first-mover advantage has kept it ahead of its rivals.
In fact, as of May 2019, NVIDIA controlled 97% of the market for data center accelerators among the top four cloud providers. And in 2020, NVIDIA's GPUs outperformed all other chips at the MLPerf benchmarks, a series of trials designed to evaluate AI technology.
But the company hasn't forgotten its gaming roots. NVIDIA's latest GeForce RTX 3090 graphics card is the fastest on the market. Moreover, according to Jon Peddie Research, NVIDIA controlled 82% of the market for discrete GPUs (dGPUs) at the end of 2020, up from 73% in the prior year. Meanwhile, AMD's market share has dropped from 27% to 18%.
Not surprisingly, NVIDIA's best-in-class accelerators have created strong demand across a range of industries -- gaming and graphics, data center computing, automotive manufacturing, and scientific research -- helping the company grow its top and bottom lines quickly.
|
Metric |
2016 |
2021 |
CAGR |
|---|---|---|---|
|
Revenue |
$2.8 billion |
$16.7 billion |
43% |
|
Free cash flow |
$1.1 billion |
$4.7 billion |
34% |
Source: NVIDIA SEC filings. CAGR: compound annual growth rate.
Even so, NVIDIA's best days may still lie ahead. In the future, self-driving vehicles promise to make roadways safer, intelligent machines could make factories and cities more efficient, autonomous drones could transform travel and logistics, and AI-powered tools could revolutionize healthcare. While many of those concepts were born in science fiction, NVIDIA's technology should help developers and engineers make them a reality.
