We all know about Nvidia (NASDAQ:NVDA) stock. It’s the sort of winning investment you would sit and tell the grandkids about in front of a crackling log fire, as the wind outside rattles the windows of the mansion.
I exaggerate, but Nvidia’s certainly produced stonking long-term returns. It’s up nearly 1,000% in five years, and about 14,000% in 10 years. And anyone who invested near the IPO in 1999 would be dancing like it still is!
Of course, Nvidia’s a very rare outlier, the sort of amazing tech stock that is typically found on the Nasdaq. But what if our very own Raspberry Pi (LSE:RPI) from the FTSE 250 is a mini-Nvidia-in-the-making?
Some similarities
It’s certainly an intriguing thought, and I do see a few broad similarities here. For a start, both are innovative tech companies led by founders. Raspberry Pi makes single-board computers and modules, while Nvidia is the king of GPUs.
Today, most of Raspberry Pi’s sales come from industrial customers, who use its modules for things like factory automation, smart buildings, and more. Similarly, Nvidia’s bread and butter is now enterprise customers rather than consumers.
Both also tie their hardware to a wider software ecosystem. The Raspberry Pi Connect platform enables secure remote access, allowing customers to carry out software updates and monitor devices. It now has over 500,000 devices registered.
Another thing worth mentioning is that Raspberry Pi’s silicon business now sells more standalone semiconductors than complete computer boards. So it’s also becoming a fabless chip firm.
Finally, both see a huge growth opportunity in agentic AI. Specifically, Raspberry Pi’s positioning itself to capture a large slice of the nascent market for small, low-cost physical devices that use local AI models to reason and take actions in the real world.
We have the opportunity to become the default embedded host for agentic AI.
Founder and CEO Eben Upton
Key differences
Having said all that, there are a couple of fundamental differences here. The most obvious is the staggering difference in profitability. Nvidia’s gross margin is 74% versus Raspberry Pi’s 24%. Their net margins are 63% and 6.7% respectively!
| Nvidia | Raspberry Pi | |
|---|---|---|
| Market cap | $5trn | £1.3bn |
| Annual revenue* | $216bn | $323m |
| Forward P/E ratio | 24 | 56 |
| Key risks | AI spending slows, competition from customers. | High valuation, squeezed margins. |
As we can see, Nvidia’s scale is on a different planet, with its revenue mainly coming from tech giants (Meta, Microsoft, Alphabet, Amazon) who are snapping up its pricey AI server racks.
Admittedly, these products make Raspberry Pi’s $1 microcontrollers and $100 single-board computers look like small beer.
Skin in the game
It’s far too early — foolish even — to suggest that Raspberry Pi could become a 10th the size of Nvidia one day. But if the UK tech firm can seize the agentic AI opportunity, I do think there’s a chance that it morphs into something much more valuable in a decade’s time.
Therefore, I recently took a position in Raspberry Pi. It’s just a small one (51 shares, to be precise). I bought these at 667p, a 37% discount to early June’s price. This was to get some skin in the game.
Looking ahead, I expect volatility because Raspberry Pi’s now sourcing memory chip stocks at inflated prices, meaning margins will take a hit next year despite higher revenue.
If the stock dips further, I’ll tuck away a few more shares, something investors could also consider doing.
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Ben McPoland own shares in Nvidia and Raspberry Pi.
