Nvidia Joins Trillion Dollar Club
Chip maker Nvidia is now worth almost as much as Amazon.
America’s largest semiconductor company $1 trillion This milestone has been achieved by just a handful of companies including Apple, Amazon and Microsoft. Many of these are familiar names, but it’s only recently that Nvidia has gained widespread prominence in his AI boom.
The chart above compares Nvidia to the seven companies that have reached the trillion dollar club.
Ride the AI wave
Nvidia’s market cap will more than double in 2023 $1 trillion.
The company designs semiconductor chips consisting of silicon slices containing specific patterns. These chips have billions of switches that process complex information simultaneously, much like you turn on the lights in your house and turn on the lights.
Today, they are integral to many AI functions, from OpenAI’s ChatGPT to image generation. Here’s how Nvidia stands up to his $1 trillion milestone company.
| club you joined | market capitalization in trillions |
peak market capitalization in trillions |
|
|---|---|---|---|
| apple | August 2018 | $2.78 | $2.94 |
| microsoft | April 2019 | $2.47 | $2.58 |
| Aramco | December 2019 | $2.06 | $2.45 |
| alphabet | July 2020 | $1.58 | $1.98 |
| Amazon | April 2020 | $1.25 | $1.88 |
| meta | June 2021 | $0.68 | $1.07 |
| Tesla | October 2021 | $0.63 | $1.23 |
| Nvidia | May 2023 | $1.02 | $1.02 |
Note: Market capitalization as of May 30, 2023
After recording record sales, the company added: $184 billion It goes up to market value in 1 day. Only two other companies have surpassed this number. Amazon ($191 billion) and Apple ($191 billion).
As Nvidia’s market cap reaches new heights, many are wondering if its explosive growth will continue or if the AI boom is just a passing moment. May be created on both sides.
bull case scenario
Big tech companies are racing to develop features like OpenAI. This kind of generative AI requires a very large amount of computing power, especially as it becomes more sophisticated.
Many tech giants, including Google and Microsoft, use Nvidia chips to power their AI operations. Consider how Google plans to use generative AI in six future products. The number of users of each exceeds his 2 billion.
Nvidia has also launched a wide range of new products since its rise to the stratosphere, from robotics to gaming. Leading the way is A100, a powerful graphics processing unit (GPU) suitable for machine learning. It also unveiled a new supercomputer platform that Google, Microsoft and Meta are among the first to adopt. Overall, 65,000 companies worldwide use their chips for a wide range of functions.
bear incident scenario
Investor optimism has driven NVIDIA to record highs, but how do some of its underlying valuations compare to other giants?
As the table below shows, the company’s price-to-earnings ratio (PER) is second only to Amazon. 214.4. It shows how much the shareholders are paying relative to the company’s earnings. Here, the company’s stock price is more than 200 times its earnings per share.
| PER | Net profit margin (annual) | |
|---|---|---|
| apple | 30.2 | 25.3% |
| microsoft | 36.1 | 36.7% |
| Aramco | 13.5 | 26.4% |
| alphabet | 28.2 | 21.2% |
| Amazon | 294.2 | -0.5% |
| meta | 33.9 | 19.9% |
| Tesla | 59.0 | 15.4% |
| Nvidia | 214.4 | 16.19% |
Consider what Nvidia’s earnings look like compared to other big tech companies.
$NVDA $963 billion market cap, 38x revenue
$MSFT $2.5 trillion market cap, 12x revenue$TSLA $612 billion market capitalization, 7.8x revenue$AAPL $2.75 trillion market cap, 7.3x revenue$GOOG $1.6 trillion market capitalization, 6.1x revenue$META $672 billion market cap, 6x revenue pic.twitter.com/VgkKAfiydx— Martin Pelletier (@MPelletierCIO) May 29, 2023
To some, Nvidia’s valuation seems unrealistic despite the promise of AI. Nvidia’s next quarter revenue is expected at $11 billion, which still means a much higher multiple than the big tech companies. This suggests that the company is overvalued at its current price.
Nvidia Growth: Will It Continue?
This isn’t the first time Nvidia’s market cap has skyrocketed.
The company’s stock price surged during the 2021 cryptocurrency rally. 100% This is due to the increased demand for GPUs. These specialized chips are useful for mining cryptocurrencies, but at the time there was a shortage of chips due to a surge in demand.
Nvidia shares fell more than 46% in the following year as cryptocurrency lost its luster.
In comparison, advances in AI may bring greater transformative power. Tech giants are rushing to partner with Nvidia, which could reshape everything from search to advertising.
