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Nvidia (NASDAQ:NVDA) and Visa (NYSE:V) don't have much in common. One designs the chips behind artificial intelligence (AI). The other gets a small fee when people pay with its cards.
But if I had $1,000 to put in stocks I'd hold until 2035, I'd split it between the two.
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Nvidia's revenue leaped 106% year over year to $96.2 billion in its latest quarter. Visa's climbed 14%, to $11.6 billion. But Visa is the pricier stock. Going by analysts' consensus estimates, Visa trades at around 25 times earnings for its fiscal 2027, which started Oct. 1. For Nvidia, it's around 15 times earnings for fiscal 2028, which starts early next year.
Put another way, investors are paying up for Visa's predictability and arguably pricing Nvidia as if its growth might fade fast. Over nine years, each company has a different job to do.
Nvidia's growth has sped up for four straight quarters. Its revenue growth rate climbed from 73% in the fourth quarter of fiscal 2026 to 85% the next quarter, then to 106% in the period ended July 26 (the second quarter of fiscal 2027).
That pace should slow. Guidance for about $108 billion of fiscal third-quarter revenue points to growth of roughly 89%. And management's early outlook for fiscal 2028 is for about 70% growth, which chief financial officer Colette Kress described in late August as limited by supply.
Nvidia is also giving much more cash back to shareholders. It returned $41.1 billion through buybacks and dividends for all of fiscal 2026, then about $20 billion in the fiscal first quarter of 2027 and $26 billion in the second. On Sept. 28, the board added $150 billion to the buyback program, leaving $235 billion that Nvidia expects to use by the end of fiscal 2028.
This plan hinges on cash keeping up with profit, and last quarter it didn't. Nvidia's net income ticked up to $59.7 billion from $58.3 billion the quarter before, but free cash flow dropped to $21.3 billion from $48.6 billion. Management said longer payment terms for some big customers pushed the average time to collect on a sale from 45 days to 60.
One quarter like that isn't an issue. But over nine years, I think this is the number to track at Nvidia, as buybacks and dividends are paid in cash, not earnings.
Visa's revenue, by contrast, tends to rise with the amount people spend on its network.
Showing how steady that spending's been, Visa's payments volume on a constant-dollar basis climbed 8% in its fiscal first quarter of 2026, then picked up to 9% and 10% in the next two quarters (the latest ended June 30).
Visa then gives its profit back. In the first three quarters of fiscal 2026, it returned around $20.4 billion through buybacks and dividends, more than its non-GAAP (adjusted) net income over that time. Its diluted class A share count for the fiscal third quarter was around 3% smaller than a year earlier, so adjusted earnings per share grew 11% while adjusted net income rose 8%.
What Visa has to keep doing is hold its costs in check. Adjusted operating expenses rose 17% in the fiscal third quarter, faster than revenue. And the company took another $237 million provision for long-running interchange lawsuits.
Visa's reported operating margin of 59% is still outstanding. But it was around 61% a year before.
Nvidia offers growth that, if it lasts, could raise its earnings well above today's level. Visa offers slower, steadier growth and a share count that keeps dropping.
Nvidia's diluted share count fell only around 1% in the last year, even though it spent much more than Visa on buybacks.
Even 10% yearly growth in Visa's earnings per share, below its recent rate, would more than double them over nine years.
Sure, plenty can go wrong in nine years, from a sharp slowdown in AI spending to new legal or regulatory limits on Visa's fees.
Still, at around $230 as of this writing, Nvidia stock looks reasonably priced to me for a company guiding for about 70% growth next fiscal year. Visa, near $375, costs more. But I think that premium buys earnings that are easier to depend on.
I'd consider splitting $1,000 equally between the two -- maybe buying each a little at a time.
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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Visa. The Motley Fool has a disclosure policy.
Nvidia and Visa Have Little in Common. I'd Split $1,000 Between Them and Hold Until 2035. was originally published by The Motley Fool
