Nvidia is on the verge of surpassing Apple to become the world’s second-most-valuable company.
Nvidia chip in a mainboard – illustrative photo. Image credit: Pixabay, free license
The rapid growth in value for Nvidia is driven by a remarkable surge in its shares fueled by the growing demand for its semiconductor chips, particularly in the field of artificial intelligence, where they power tools like ChatGPT.
In just nine months, Nvidia’s market valuation has soared from $1 trillion to over $2 trillion, outpacing major entities such as Amazon.com, Google-parent Alphabet, and Saudi Aramco along the way.
Presently, Nvidia’s market capitalization stands at approximately $2.38 trillion, trailing Apple by around $230 billion and Microsoft by roughly $645 billion.
The company’s robust performance in the high-end AI chip market, where it commands an 80% share, has not only contributed to its staggering growth but has also played a significant role in propelling Wall Street to record highs this year, with Nvidia accounting for over 5% of the benchmark S&P 500 index.
Nvidia, experiencing a remarkable 95% increase, and Meta Platforms, with a notable 46.6% increase this year, have surpassed other members of the so-called Magnificent 7, clearly illustrating the growing investor enthusiasm for all things related to artificial intelligence (AI).
Amidst challenges such as slowing iPhone sales, Apple relinquished its position as the most valuable U.S. company to Microsoft for the first time since 2021 in January. Nvidia has also recently overtaken Tesla as the most traded stock by value on Wall Street.
Despite its impressive run, Nvidia’s 12-month forward price-to-earnings ratio of 36.6 is lower than a year ago, making it comparatively more affordable than other stocks in the “AI narrative” category.
However, there are indications that Nvidia’s stock may be approaching a peak. Analysts’ median target price over the next 12 months suggests a trading value of $850 per share, below the latest closing price of $926.
While sustaining rapid growth for a mega-cap stock becomes challenging due to the law of large numbers, the stock price could potentially remain at these levels if Nvidia continues to meet or exceed analysts’ high expectations.
Written by Alius Noreika