US stocks aren’t known for paying generous dividends, at least compared to the impressive payouts from UK companies. But with the right investing strategy, a portfolio of American shares can still go on to generate a chunky passive income.

In fact, for investors starting from scratch today, a £24,000 passive income stream can be unlocked in as little as seven years. Here’s how.

Earning passive income with growth stocks

When using a Stocks and Shares ISA, any capital gains from US growth stocks can be enjoyed entirely tax-free. That’s a critical advantage since it eliminates an often-overlooked headwind to building wealth.

Once a growth-oriented portfolio has become large enough, investors can then go on to generate an income stream even without dividends. How? By simply selling some shares each year.

In general, most financial advisers recommend withdrawing no more than 4% of a portfolio each year as an income stream. That way, a portfolio can continue to steadily grow over time, even after an investor starts to trim positions. And following this rule, a portfolio would need to be worth roughly £600,000 to generate a £2,000 monthly income.

That’s actually a lot more obtainable than what most people think. To demonstrate, let’s say an investor put just £500 a month into a low-cost S&P 500 index tracker, and the US stock market continues to generate its long-term average return of 10% a year. In this scenario, a portfolio would reach the £600,000 threshold in roughly 24 years.

But investors could potentially do even better…

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Speeding up compounding

By creating a custom portfolio of only the best businesses, investors could earn considerably better returns than 10%. Just ask anyone who invested in Nvidia (NASDAQ:NVDA) over the last decade.

Since March 2016, the semiconductor titan has generated a staggering 22,800% total return. That’s the equivalent of a 72% annualised return – seven times the S&P 500’s long-term average. And anyone whose been drip feeding £500 each month not only surpassed the £600,000 threshold in less than seven years, but has gone on to earn over £9m!

Still worth considering?

Nvidia’s stellar surge is definitely an outlier of the last decade. But it’s not the only US stock to have delivered ginormous gains, with companies like Tesla, Microsoft, AMD, and Broadcom all generating jaw-dropping gains.

Even in 2026, hyperscaler capex on Nvidia’s latest chips continues to accelerate, with its latest Blackwell cards adding over $13bn of revenue in the latest quarter. And later this year, the company’s expected to launch its brand-new Vera Rubin architecture that’s even more powerful.

With staggeringly high profit margins, it’s clear Nvidia’s exercising its exceptional pricing power. But it’s important to recognise that this gravy train won’t run forever.

Hyperscalers are making rapid progress in developing their own in-house silicon. And once these chips start offering superior unit economics, Nvidia may find its order book starting to shrink.

All things considered, with a $4.4trn market-cap, Nvidia isn’t likely to generate another 228x return over the next decade. And while the growth story’s far from over, today’s valuation leaves little room for error.

Nevertheless, the company serves as a perfect example of the game-changing returns US stock picking can offer when investors find the businesses with the widest competitive moats.