One of the best-performing large shares in recent years has been US chip giant Nvidia (NASDAQ: NVDA). Nvidia stock has soared 897% over the past five years. It is now the most valuable listed company in the world.

What does that mean in numbers?

From £10k to £100k in just five years

Bear in mind that an 897% gain does not turn 100 into 897. That 897% gain is on top of the initial 100, so it turns it into 997.

In practice, that means that somebody who put £10k into Nvidia stock five years ago and held it until now would be sitting on a shareholding worth £99,700.

That is tantalisingly close to £100k! In fact thought, Nvidia is around 8% below its all-time high, achieved this year. So the £10k would have been turned into a holding worth £100k in under five years.

Note that I am ignoring exchange rate fluctuations here between sterling and the US dollar in which Nvidia stock is denominated, though they are a risk when investing in foreign-denominated shares.

On top of the capital gains there have been dividends along the way. Nvidia increased its dividend by a stunning 25 times this year. But the strong share price growth of recent years means that the yield is still a fairly meagre 0.5%.

Still, for someone who invested five years ago, the lower purchase price means they would now be yielding over 4%. On a £10k investment back then, that now amounts to over £400 of dividends a year.

Sticking to the principles of good investment

This is all exciting stuff. To get from £10k to £100k in five years is simply stunning. It is the stuff of investor dreams.

Dreams can be a bad guide when it comes to making practical choices though. Lots of shares have done far worse than Nvidia over the past few years. That is why diversification matters and in this context, I am talking about £10k put into Nvidia stock as part of a wider portfolio.

If I had £10k in total to invest, I certainly would not put it all into one share. No matter how brilliant a business looks, it can disappoint.

Where might things go from here?

Take Nvidia today as an example. As the dividend increase shows, the company is doing phenomenally well and generating excess cash by the bucketload.

But there are still risks. One is if AI investment slows, perhaps because business leaders start to question their return on investment in costly chips. Some AI leaders have recently suggested slowing the pace of growth.

Another risk is a competitor coming up with lower-priced chips that have a value proposition to undermine Nvidia’s offer. Nvidia chips are top notch, but with a price tag to match. Not all customers necessarily need the best-in-class offer.

However, Nvidia’s revenue growth has been very strong. Its proprietary offer continues to give it a strong competitive advantage, in my view.

At 28 times earnings, I do not see the current Nvidia stock price as a screaming bargain, given the risks. For an investor willing to accept such risks though, I do see it as worth considering.

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Christopher Ruane does not hold any positions in the companies mentioned.