Nvidia became the world’s most valuable company on Tuesday, dethroning tech heavyweight Microsoft as its high-end processors play a central role in the battle for dominance in artificial intelligence technology.
The chipmaker’s shares rose 3.5 percent to $135.58, lifting its market capitalization to $3.335 trillion (roughly 2,78,15,901 crore rupees), just days after it overtook iPhone maker Apple to become the second most valuable company.
Microsoft’s stock market value was $3.317 trillion as its shares fell 0.45 percent.
Apple shares slipped more than 1 percent, leaving their value at $3.286 trillion.
Nvidia’s incredible rise in market value over the past year has become emblematic of Wall Street’s optimism-driven frenzy about emerging AI technology.
While Nvidia’s rise has lifted the S&P 500 and the Nasdaq to record highs, some investors worry that unbridled optimism about artificial intelligence could fizzle out if there are signs of a slowdown in tech spending.
“It’s Nvidia’s market; we’re all just trading it,” said Steve Sosnick, chief market strategist at Interactive Brokers.
Nvidia has also become by far the most traded company on Wall Street, with daily turnover recently averaging $50 billion, compared with about $10 billion for Apple, Microsoft and Tesla, according to LSEG data. The chipmaker now accounts for about 16 percent of all trading in S&P 500 companies.
Nvidia shares have nearly tripled so far this year, compared with a roughly 19 percent rise in Microsoft shares, with demand for its high-end processors outstripping supply.
Tech giants Microsoft, Meta Platforms and Google owner Alphabet are competing to build their AI computing capabilities and add the technology to their products and services.
The voracious appetite for Nvidia’s AI processors, which are considered far superior to competitors’ offerings, has left them in short supply, and many investors see Nvidia as the biggest winner so far from the surge in AI.
“Nvidia has received a lot of positive attention and has been doing a lot of things very right, but a small misstep is likely to cause a big correction in the stock, and investors should be cautious,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York.
Tuesday’s gain lifted Nvidia’s stock to a record high and added more than $110 billion to its market capitalization, equal to the entire value of Lockheed Martin.
The company’s market value rose from $1 trillion to $2 trillion in just nine months in February, while it took just over three months to reach $3 trillion in June.
Since its doomsday forecast about a year ago, the company has consistently beaten Wall Street’s lofty expectations for revenue and profit, with demand for its graphics processors far outstripping supply as companies rush to incorporate AI applications.
Nvidia executives said in May that demand for their Blackwell AI chips could exceed supply “well into the next year.”
A sharp rise in analyst expectations for Nvidia’s future earnings outweighed its stellar stock gain, resulting in a decline in the stock’s earnings estimate.
Nvidia recently traded at 44 times expected earnings, down from more than 84 about a year ago, LSEG data showed.
Increasing the appeal of its highly valued stock among individual investors, Nvidia split its stock 10 for one last week.
© Thomson Reuters 2024
