Amid the artificial intelligence boom, semiconductor maker Nvidia's rapid growth has seen the chip giant's market capitalization surpass that of major tech companies, solidifying its position as the world's most valuable company.
Nvidia's shares rose 3.51% to $135.58 per share at market close on Tuesday, giving the company a market capitalization of more than $3.4 trillion, surpassing other U.S. tech giants Microsoft and Apple.
The company's market capitalization has more than tripled over the past year as interest in AI has grown.
Wednesday is a US holiday, so Nvidia is expected to hold firm at least until Thursday morning, when markets reopen.
National We look back at Nvidia's journey to the top and explore the market factors driving the company's growth.
What is Nvidia?
Nvidia designs and manufactures AI hardware and software for industry. GPUs can handle many tasks simultaneously, making them useful for machine learning, video editing and gaming applications.
Since its founding in 1993, the company has been known for making computer chips that run graphics-intensive video games, but recently, AI labs and researchers have started using the same chips to run AI algorithms, revolutionizing the field.
The change quickly caught the attention of investors and tech giants.
The competition between technology companies and AI developers is fierce, with companies like Microsoft, Google parent Alphabet, Meta, and Apple all working on developing next-generation AI products. This fierce competition favors Nvidia, which is not only developing its own AI technology but is also a major player in the AI chip market.
Nvidia's revenue has surged over the past few quarters as companies including Meta, Amazon, OpenAI and Microsoft bought chips.
The best rally ever
Nvidia shares have been one of the best-performing stocks in the S&P 500 index this year, rising more than 15%.
The California-based company's shares have risen more than 3,477% in the past five years, from $3.79 to $135.58.
Its shares have surged more than 209% over the past 12 months and 181% so far this year. By comparison, Microsoft and Apple's shares are up 20.3% and 15.4%, respectively, this year.
Nvidia on Tuesday overtook Microsoft in market capitalization. The Redmond-based company's market capitalization was $3.32 trillion as of Tuesday's market close, nearly $20 billion less than Nvidia's.
Nvidia overtook iPhone maker Apple, which has a market capitalization of $3.29 trillion, earlier this month, and last week Apple briefly overtook Microsoft to trade at the top of the list.
This is followed by Alphabet ($2.2 trillion), Amazon ($1.9 trillion) and Saudi Arabian oil giant Aramco ($1.8 trillion).
Huang is one of the richest people in the world
Nvidia's stock price has soared, making the company's co-founder and CEO, Jensen Huang, one of the world's richest individuals.
Hwang's net worth is $119 billion, up about $75 billion since the beginning of the year, according to the Bloomberg Billionaires Index, making him the 12th richest person in the world.
Nvidia's AI accelerators are chips that help businesses and data centers around the world develop AI chatbots, and have become hugely popular in recent years.
“NVIDIA has finally reclaimed the title of the world's most valuable company… The catalyst was a bullish outlook from analysts at Rosenblatt Securities who revised their PT. [price target] “The stock price will rise to $140-$200 and the market cap will reach $5 trillion over the next 12 months,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in a note.
Industry analysts said NVIDIA will continue to perform well despite the competitive and changing market environment.
Despite predictions of increased competition and big tech companies becoming more self-reliant in producing their own chips, Nvidia's profitability and outlook suggest that rising demand across the sector is likely to offset any challenges it faces for the rest of the year, said Thomas Monteiro, senior analyst at Investing.com.
“The company's figures for the last quarter were [earnings] “The company's leadership in the AI revolution remains unshakable,” Monteiro said. The National.
Nvidia said it expects revenue of $28 billion, plus or minus 2%, for the quarter ending in July, beating the $26.6 billion forecast by LSEG analysts.
For the first quarter ended April 28, NVIDIA reported revenue of $26.04 billion, up 18% from the previous quarter and 262% on an annualized basis, beating expectations of $24.65 billion.
Net profit for the period increased 628% year-over-year to approximately $14.9 billion.
This marks the company's fourth consecutive quarter with revenue exceeding $10 billion.
Nvidia's strong performance last quarter was mainly driven by its data center business, which makes chips used to build and run generative AI technologies such as ChatGPT.
The division's first-quarter revenue hit a record $22.6 billion, up 427% from the same period last year.
The Race to $4 Trillion
Last month, Nvidia impressed investors by announcing a 10-for-1 stock split, signaling that its investments in AI computing remain strong.
The shares began trading on a split-adjusted basis on June 10. Holders of common stock were awarded nine additional common shares.
“NVIDIA is extremely well positioned for at least the next few years as demand continues to explode and the transition to AI appears to still be in its early stages… It's not going to be easy to compete with them in the near future,” said Vijay Malloria, chief investment officer at Orlando-based Regal Point Capital Management. The National.
“Now that the stock split has occurred, we expect demand from retail investors to increase. The stock would need to rise another 21%+ to reach a market cap of $4 trillion. I would not be surprised to see this happen within the next 12 months.”
Stock splits are a tactic used by companies to lower the cost of purchasing individual shares. They do not change the company's financial base, but they do attract retail investors who make small trades.
Following Nvidia's rise to the top, Chris Penrose, global head of communications business development at the company, said the company is working to improve production and technology as demand surges.
He predicted further growth for the industry.
“The generative AI journey is truly transforming enterprises and telcos around the world… we're just at the beginning,” Penrose said at the event in Copenhagen.
“Over the next 12 months, the race to reach $4 trillion in market cap in tech will likely center around Nvidia, Apple and Microsoft,” Wedbush Securities said in a note.
Updated: June 19, 2024 5:16 PM
