Investing in the S&P 500 index has long been a great way to take advantage of the economy's growth. But in many cases, buying and holding individual stocks has resulted in far more impressive gains. While there has been a lot of turmoil in the markets of late, a simple buy-and-hold strategy has worked incredibly well.
Over the past 10 years, the S&P 500 has risen by 174% (assuming an April 1 cutoff). But during that same time frame, chipmaker Nvidia (NVDA +1.63%) has produced gains of nearly 21,000% for investors. To put that into perspective, that means a $5,000 investment in the company 10 years ago would have grown to a value of more than $1 million by now. By comparison, the same size investment in the S&P 500 would be worth less than $14,000.
Nvidia has been an incredible growth stock, and it's been a bit of an anomaly -- no other stock within the index has come close to generating the same types of returns over the past decade. Below, I'll look at who is in the second spot, and how close its returns are to Nvidia's.
NASDAQ: NVDA
Key Data Points
A familiar rival for Nvidia
The second-best-performing stock on the S&P 500 over the past decade is none other than Nvidia's rival Advanced Micro Devices (AMD +1.65%), more commonly referred to as AMD. Over the same time frame that Nvidia has risen by nearly 21,000%, AMD has amassed gains of more than 3,700%. A $5,000 investment at the beginning of that time frame would have grown to a value of $191,000. That's still an impressive performance, but unfortunately, anything can look modest in relation to Nvidia.
Data by YCharts.
For the most part, however, the two tech stocks performed similarly well. The big delta emerged in 2023 and grew more prominent as Nvidia became synonymous with artificial intelligence (AI). Its AI chips have been crucial for companies developing AI chatbots, and enhancing their products and services with next-gen capabilities. While AMD also makes AI chips, it has been lagging behind Nvidia, and investors and analysts don't appear convinced that those chips will be competitive and take significant market share.
Nvidia's growth rate has been far superior to AMD's
AI has been a mammoth catalyst for Nvidia, with its growth rate surpassing 200% last year. While that has come down as the company has been lapping some incredibly strong performances, its growth rate remains far higher than AMD's, which is why it has been the more lucrative investment to own.
Data by YCharts.
AMD's growth rate has been picking up, and it's possible the gap between these two companies may shrink in the future. AMD launched its latest AI chips late last year; how they perform could be key in determining just how well its growth rate ends up being, and how the stock does in relation to its rival.
NASDAQ: AMD
Key Data Points
Which stock is the better buy today?
If AMD's growth rate continues to accelerate while Nvidia's slows down, it wouldn't be surprising to see growth investors pivot more toward AMD in the future, especially given its more modest valuation ($135 billion versus $2.2 trillion for Nvidia). But if you're bullish on AI, it may not be a bad idea to hold a position in both companies. These businesses are likely to experience strong growth due to AI for years to come. They've both been excellent buys and can continue to deliver great returns for investors over the long haul.
