Palantir was the top-performing stock in the S&P 500 in 2024. But this other artificial intelligence (AI) powerhouse has become the best performing S&P 500 stock over the past 2 decades.

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Following a stellar performance in 2023, S&P 500 And Nasdaq Composite In the year Another year of generous profits is posted in 2024. Among the biggest gainers in the market over the past two years, megacap tech stocks have collectively “Amazing seven.”

However, last year one small player outperformed each of its peers by a wide margin. In the year In 2024, data analytics company shares Palantir Technologies (NASDAQ: PLTR ) It’s up 340% — the top performer in the S&P 500 index.

Having said that, the rise in Palantir’s share price led to a modest expansion in the price. By most traditional valuation metrics, Palantir stock should currently be considered expensive and overbought.

Image source: Getty Images

Below, I reveal which artificial intelligence (AI) stocks have outperformed the S&P 500 over the long term. Additionally, I explain why this stock is reasonably valued and makes an attractive buy right now.

Based on data compiled by YCharts, a semiconductor stock Nivea (NASDAQ: NVDA ) It has outperformed the S&P 500 over the long term. In the table below, I’ve broken down Nvidia’s total returns over the past five, 10, 15, and 20 years.

Measure	5 years	10 years	15 years	20 years
Nvidia’s total stock return	2,130%	28,650%	32,990%	82,830%

Data source: YCharts.

To put these percentages into perspective, if you had invested even $1,000 in Nvidia 20 years ago, you would have more than $800,000 today.

Considering the figures above, there are a few thoughts I’d like to explore. Every now and then a game-changing company comes along and turns a modest investment into a generational fortune. However, a return of this magnitude is extremely rare.

The overarching theme I want to drive home is the importance of investing for the long term. Berkshire Hathaway CEO and world-renowned investor Warren Buffett once said, “If you don’t plan on owning a stock for ten years, don’t plan on owning it for ten minutes.” Clearly, holding Nvidia stock over the past two decades has been a good decision.

However, just because you decide to buy a stock and hold it for several years does not guarantee a market-beating return. Whether people like to admit it or not, there is always a certain amount of luck in the investment world.

NVDA total return rate chart — NVDA total return rate Data in YCharts

In the chart above, you can see that most of Nvidia’s gains have taken place over the past two years. the reason? Because AI has become the next megatrend in the stock market, and Navid’s critical role in the space has spurred extended buying activity.

In the end, it’s unlikely that those people who bought and actually owned Nvidia stock 20 years ago were thinking about AI when they took positions at the company.

In the year In 2024 alone, Nvidia shares rose 171 percent, and the company gained more than $2 trillion in market capitalization. Yet despite this unprecedented rate of valuation, Nvidia stock remains reasonably valued.

NVDA net income (quarterly) chart — NVDA Net Income (Quarterly) Data in YCharts

The chart above shows the interesting dynamic between Nvidia’s revenue and profitability. Notably, while AI tailwinds have led to record growth for the company across the board, Nvidia’s net income and free cash flow are accelerating faster than the company’s market value.

This means that even though Nvidia stock has risen significantly over the past few years, shares remain at a reasonable price point when viewed by valuation metrics such as price-to-earnings (P/E) or price-to-earnings ratios. to-free-cash-flow (P/FCF) ratios.

Right now, Nvidia stock trades at a price-to-earnings ratio of 31.7 — about the same as it traded at this time last year. Considering that 2025 will be another milestone year for the company thanks to the new Blackwell chip architecture, I suspect that Nvidia’s profit margins are well positioned to continue expanding.

As long as the current volatility shown in the chart above continues to hold, Nvidia stock should remain reasonably priced — making it a buzz buy for investors with a long-term horizon.

Before you buy stock in Nvidia, consider this:

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Adam Spatacco He has held positions at Nvidia and Palantir Technologies. He has positions in the Motley Fool and recommends Berkshire Hathaway, Nvidia and Palantir Technologies. The Motley Fool has Disclosure Policy.

Palantir was the top-performing stock in the S&P 500 in 2024. But this other artificial intelligence (AI) powerhouse has become the best performing S&P 500 stock over the past 2 decades. Originally published by The Motley Fool.