Back in the late 1990s, almost everyone had a similar story. They either had ‘this friend’ or knew someone who without a lot of financial background took a flier on a stock called Intel (INTC), held it for years, and became a millionaire in the process. Granted, these stories don’t seem as impressive nowadays with some people turning thousands into millions in a much shorter period of time, but at the time, the run in INTC was something dreams were made of. Looking just at the stock’s performance beginning in 1991 and through its peak in August 2000, INTC rallied nearly 6,300%. That’s a ten-bagger times six!
Despite semiconductors only becoming a bigger part of the economy in the most recent bull cycle, INTC has been a laggard relative to other semis over the last ten years. Hands down, the star of this cycle has been Nvidia (NVDA), and if we compare the performance of INTC from 1991 through the end of 2000 to NVDA now, there are a number of similarities. The first chart compares INTC’s performance in the 1990s through its August 2000 high to NVDA’s performance starting in 2012 and covering the same amount of time. As shown, both stocks followed very similar paths. Whereas INTC was up 6,300%, NVDA was up over 6,700%.
The last four months of 2000 were rough on INTC, though. From September through December 2000, INTC shares fell nearly 60%, cutting the nearly 6,300% advance down to 2,780%. Unlike INTC, though, NVDA has kept running. At its most recent high on 11/19, NVDA’s rally since the start of 2012 was 10,000% – or a hundred bagger! Since that peak, NVDA shares have pulled back just over 15%, taking its total gain down to ‘just’ 8,610%.
Not only were the last four months of 2000 painful for INTC, but the declines didn’t end there. 2001 and 2002 were also painful years for the stock, and by the time it bottomed in January 2003, INTC was down 79% from its August 2000 peak. Even after that low, INTC didn’t make much headway and actually made a lower low during the depths of the financial crisis, and it wasn’t until 2018 that INTC finally took out its highs from 2000. Just because INTC crashed and burned from its peak during the dot-com bubble after its epic run hardly means that this era’s star from the semiconductor sector will follow a similar path, and it’s not a bet we would make. However, the odds of any stock rallying more than 10,000% in the span of ten years are low enough, but the odds of one trading at over 60 times earnings that is already up 10,000% in ten years continuing that pace in the years ahead are even slimmer. Click here to view Bespoke’s premium membership options.