3 tech stocks that turned $ 10,000 into over $ 500,000

Legendary investor Peter Lynch coined the term “multibagger” in his evergreen investing book A blow to Wall Street to describe stocks that have more than doubled in price. A stock that doubled in value was known as “two baggers”, while a stock that increased 20 times was called “20-baggers”.

Growth-oriented investors often look for multibagger stocks in the tech sector, which has more than its fair share of high growth and disruptive companies. It may seem difficult to find the next big multibagger in this diverse industry, but studying a few stocks that have already crossed that threshold could help investors identify future winners.

Let’s take a look at three tech stocks that turned a modest $ 10,000 investment into over $ 500,000 – and what lessons we can learn from their massive multibagger gains.

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1. Baidu: turn $ 10,000 into over $ 600,000

Baidu (NASDAQ: BIDU), the Chinese tech company with the country’s largest search engine, went public in 2005. If you had invested $ 10,000 in its IPO, your stake would be worth over $ 600,000 today.

Between fiscal 2005 and 2010, Baidu’s annual revenue grew at an impressive compound annual growth rate (CAGR) of 97.8%. The growth of the Chinese economy, increasing income levels and higher internet penetration rates have spurred this growth, and Baidu consolidated its leadership position in online search in 2010 after AlphabetGoogle has pulled out of mainland China.

Between 2010 and 2015, Baidu’s annual revenue grew at a CAGR of 53.6% as it expanded its ecosystem beyond its search engine with new mobile apps and cloud storage services. .

But between 2015 and 2020, Baidu’s revenue only grew at a CAGR of 9.9%, due to tighter restrictions on its online advertising, growing competition from monolithic apps like Tencent‘s WeChat, and the slowdown in the Chinese economy has hampered its growth. The pandemic exacerbated that pain last year, and Baidu remains exposed to the Chinese government’s growing crackdown on its major tech companies.

As a result, Baidu’s stock price has fallen by around 40% in the past six months and has remained roughly stable over the past five years. This dismal performance indicates that high-growth multibagger stocks like Baidu may lose momentum as their core markets mature, new competitors enter the market, and government regulators change the rules of the game.

2. Shopify: turn $ 10,000 into almost $ 900,000

Shopify (NYSE: SHOP), a Canadian e-commerce services company that allows businesses to set up their own online stores, process their own orders, and manage their own marketing campaigns, went public in 2015. An investment of $ 10,000 in its introduction on the stock market would be worth nearly $ 900,000 today.

Image source: Getty Images.

Shopify grew like a weed because a lot of small businesses didn’t want to link to big online marketplaces like Amazon (NASDAQ: AMZN), which hold back their sellers with referral fees and restrictive rules. This transition accelerated throughout the pandemic last year as more companies opened online stores.

Shopify’s revenue grew at a 70.2% CAGR between 2015 and 2020. Inventory has grown more than 30% this year, although concerns about slowing online spending in a post-pandemic market have beaten other ecommerce stocks – and investors continue to pay a premium for Shopify’s growth at over 40 times this year’s sales.

Unlike Baidu, Shopify does not yet face existential challenges. Its decentralized approach to e-commerce continues to disrupt Amazon’s centralized platform, and it could have a lot of room to grow in the long term as more offline merchants bring their businesses online.

3. Nvidia: turn $ 10,000 into $ 8.16 million

Nvidia (NASDAQ: NVDA), the world’s largest producer of discrete GPUs for computers, servers, and video game consoles, went public in 1999. If you had invested $ 10,000 in its IPO at the time, your initial investment would now be worth nearly $ 8. , $ 2 million.

Nvidia has experienced a massive growth spurt over the past five years, as demand for its gaming and data center GPUs has reached record highs. A new generation of PC gaming has increased the sales of its gaming GPUs, while new AI applications in data centers have created strong demand for its high-end server GPUs.

Higher cryptocurrency prices have also periodically increased sales of Nvidia’s gaming GPUs for mining purposes, and it has sold more Arm-based Tegra processors for connected cars and NintendoSwitch consoles.

These favorable winds, along with its acquisition of data center equipment maker Mellanox last April, increased Nvidia’s annual revenue to a 27.2% CAGR between fiscal 2016 and fiscal 2021. .

Nvidia remains one of the fastest growing chipmakers in the market, although its plan to acquire Arm Holdings remains on the ice. He continues to widen his lead over Advanced micro-systems in the discrete GPU market, and it remains a solid investment in the centuries-old growth of the gaming, data center and AI markets.

Nvidia’s stock price has risen over 50% this year, but its stock still looks surprisingly cheap at 12 times expected earnings. Therefore, Nvidia’s shares could still have a lot of wiggle room, even if regulators roll back its ambitious Arm Holdings takeover.