Nvidia became the world’s most valuable company on Tuesday, overtaking tech giant Microsoft. This milestone was achieved as Nvidia’s advanced processors have become central to the race to dominate artificial intelligence technology. Shares of the chipmaker rose 3.5% to $135.58, boosting its market capitalization to $3.335 trillion. This achievement comes shortly after Nvidia surpassed Apple to become the second most valuable company. Nvidia’s remarkable increase in market value over the past year symbolizes Wall Street’s enthusiasm for emerging AI technology.
Nvidia’s rise has significantly contributed to the S&P 500 and Nasdaq reaching record highs. However, some investors are concerned that the current optimism surrounding AI may dissipate if there are indications of a slowdown in spending on the technology. Nvidia has also emerged as the most traded company on Wall Street, with an average daily turnover of $50 billion, in stark contrast to the approximately $10 billion for Apple, Microsoft, and Tesla. Nvidia now represents about 16% of all trading in S&P 500 companies. Its stock has nearly tripled this year, compared to a 19% increase in Microsoft shares, as demand for its premier processors continues to outstrip supply.
Tech giants such as Microsoft, Meta Platforms, and Google-owner Alphabet are competing to expand their AI computing capabilities and incorporate the technology into their products and services. The immense demand for Nvidia’s AI processors, regarded as superior to competitors’ products, has resulted in a tight supply, positioning Nvidia as the leading beneficiary of the burgeoning AI development.
Oliver Pursche, senior vice president at Wealthspire Advisors in New York, cautioned that while Nvidia has received substantial positive attention and has been making strategic moves, any minor misstep could lead to a significant correction in its stock value, advising investors to remain vigilant.
Nvidia’s stock reached a record high on Tuesday, adding over $110 billion to its market capitalization, an amount equivalent to the entire value of Lockheed Martin. The company’s market value increased from $1 trillion to $2 trillion in just nine months as of February and took slightly over three months to reach $3 trillion in June.
Since its impressive forecast about a year ago, Nvidia has consistently exceeded Wall Street’s high expectations for revenue and profit, with demand for its graphics processors vastly outpacing supply as companies rush to integrate AI applications. Nvidia executives indicated in May that demand for its Blackwell AI chips could surpass supply well into next year.
Sharp increases in analysts’ expectations for Nvidia’s future earnings have outpaced its exceptional stock gains, resulting in a reduction in the stock’s earnings valuation. Nvidia recently traded at 44 times expected earnings, down from over 84 about a year ago. Additionally, to enhance the appeal of its highly valued stock among individual investors, Nvidia split its stock 10-for-one last week.
READ MORE: