The 5 Best-Performing S&P 500 Stocks of the Last Decade -- Including Nvidia and Broadcom

The top five S&P 500 performers over the past decade were predominantly technology companies, with semiconductors, AI, and data centers driving significant returns. Nvidia led with a remarkable 26,927% gain, followed by Advanced Micro Devices (AMD) at 10,971%, both benefiting from the AI boom and data center expansion. Broadcom, Arista Networks, and Axon Enterprise also posted substantial growth exceeding 2,800%. While Nvidia and AMD appear reasonably valued based on forward P/E ratios, Broadcom, Arista, and Axon exhibit signs of being overvalued compared to their historical averages, suggesting potential valuation concerns despite strong past performance.

Analysis

The past decade's top five S&P 500 performers, led by Nvidia (NVDA) with a 26,927% gain and Advanced Micro Devices (AMD) at 10,971%, highlight the significant returns driven by the technology sector, particularly semiconductors, AI, and data centers. These companies achieved average annual growth rates of approximately 75% and 60% respectively, substantially outpacing the S&P 500's 15% average over the same period. Broadcom (AVGO), Arista Networks (ANET), and Axon Enterprise (AXON) also posted substantial gains exceeding 2,800%, further underscoring the sector's robust performance.

Nvidia, a dominant force in AI and data center chips, appears reasonably valued with a forward P/E of 28, below its five-year average of 39, despite its torrid growth. AMD, also benefiting from AI and data center expansion and taking market share from Intel, shows a forward P/E of 35, slightly above its five-year average of 30, but is still considered reasonably valued. Both companies have strategic partnerships with OpenAI, supporting continued growth in the AI boom.

Conversely, Broadcom, Arista Networks, and Axon Enterprise exhibit signs of overvaluation compared to historical metrics. Broadcom's forward P/E of 37 is well above its five-year average of 19, despite strong Q3 revenue growth of 22% year-over-year and Q4 guidance of 24%. Arista Networks, with a forward P/E of 42 against a five-year average of 32, and Axon Enterprise, with a forward P/E of 83 against a five-year average of 74 and a P/S ratio nearly double its five-year average, suggest caution due to elevated valuations.

Key Decisions for Investors

• Investors should scrutinize current valuations, particularly for Broadcom, Arista Networks, and Axon Enterprise, which show forward P/E ratios significantly above their five-year averages, indicating potential overvaluation despite strong past performance.
• Monitor developments in AI and data center infrastructure, as these remain key growth drivers for the semiconductor sector, benefiting companies like Nvidia and AMD.
• For investors seeking diversified exposure to the semiconductor and data center sectors with reduced single-stock risk, an ETF like the iShares Semiconductor ETF (SOXX) could offer a viable approach.
• Consider an incremental investment strategy or adding to a watchlist for companies with high valuations but strong long-term prospects, rather than making a large upfront investment.