Nvidia's market capitalization surpassed Apple's to become the world's second, second only to Microsoft

Tencent Technology

2024-06-06 03:15Posted on the official account of Beijing Tencent News Technology Channel

Nvidia's market capitalization surpassed Apple's to become the world's second, second only to Microsoft

Tencent Technology News reported in the early morning of June 6, Beijing time, that the share price of artificial intelligence chip giant Nvidia once soared to $1222.99, with a market value of more than $3.01 trillion, and once surpassed Apple in the intraday to become the world's second largest company after Microsoft, opening a new chapter in the market value reshuffle of Wall Street giants.

At the same time, as the co-founder and CEO of Nvidia, Huang's worth has also risen. His net worth exceeded $100 billion, making him one of the 16 "super-rich" on Forbes' list of the world's richest people with assets of more than $100 billion, but still trailing the likes of Bill Gates, Jeff Bezos and Elon Musk.

Nvidia's second-quarter revenue forecast on May 22 was higher than consensus expectations and announced a stock split plan (1-for-10), a series of positive news that boosted investors' confidence and encouraged them to continue betting on the AI leader. Since then, Nvidia's stock has risen nearly 20% and 140% this year. And in 2023, Nvidia's share price leads the S&P 500 with a 238.9% gain.

Among this year's "Big Seven", Nvidia is undoubtedly the brightest performer, while Meta's stock is close behind with a 35.6% gain. However, Tesla's stock has emerged as a notable exception in terms of earnings and valuation, with a projected decline of 28.9% in 2024, leading the market.

Commenting on Nvidia's market performance, Derren Nathan, head of equity analysis at Hargreaves Lansdown, said: "The market has struggled to keep up with Nvidia's improving growth trajectory. Although the current forward P/E ratio is around 35x, this does not feel like a bubble zone. ”

According to LSEG, Nvidia's most recent forward P/E ratio is 36x, compared to 38x and 21x forward P/E for AMD and Intel, respectively. Nvidia's share price has more than doubled year-to-date after more than tripling last year, demonstrating its strong market appeal and growth potential.

At the same time, Microsoft's share price is also at an all-time high, with a relatively modest rise of about 12% so far in 2024. In contrast, Apple's performance has been less than satisfactory. Despite a strong rally in May, Apple's share price has not risen or fallen by more than double digits so far this year.

Nvidia's market capitalization has three milestones

The continued leap in Nvidia's market capitalization is remarkable. A year ago, the company had a market capitalization of less than $1 trillion, behind giants like Google's parent company Alphabet, Amazon, Apple and Microsoft. In the ranking of the "Big Seven", its market capitalization is only slightly higher than that of Meta and Tesla.

However, Nvidia's market capitalization is growing rapidly. By the close of trading on June 13, 2023, its market capitalization had successfully crossed the $1 trillion mark. And on February 23, 2024, it will strongly exceed 2 trillion US dollars, becoming the fastest company to jump from 1 trillion US dollars to 2 trillion US dollars in market capitalization.

On May 22 this year, Nvidia's stellar results pushed the company's stock price to continue to climb. On May 23, Nvidia's stock price crossed the $1,000 mark for the first time, reaching a staggering $2.5 trillion market capitalization, a milestone less than a year after it surpassed its $1 trillion market capitalization.

Tech giants bet on AI to buy Nvidia chips

Big tech companies such as Microsoft, Google, and Apple have all seen AI as an important development direction and are investing heavily in it. Among them, many funds are directly used to purchase Nvidia's chips, which undoubtedly provides a strong impetus for Nvidia's growth.

Nvidia has undoubtedly become one of the biggest beneficiaries of the AI boom. In its latest earnings report, the company said revenue from its data center division surged a staggering five-fold as customers raced to buy its high-performance chips.

Dan Coatsworth, an investment analyst at AJ Bell, explained Nvidia's stock price surge by saying: "Nvidia's business is strong and its growth prospects are promising, while the topic of artificial intelligence remains dynamic and influential. Investors seem to be deeply attracted by this moving melody and can't stop. ”

Apple stock has long been seen as the blue-chip stock of Wall Street, but it has faced quite a few challenges in recent months. Due to weak demand for iPhones and intensified competition in the Chinese market, Apple's stock price has gradually lagged behind other big tech companies, and has continued to decline so far this year.

Earlier this year, Microsoft overtook Apple to become the world's most valuable company on the return on its early investment in artificial intelligence in cloud computing services.

The rally in Nvidia shares has also benefited from the participation of new AI startups, notably xAI, founded by Tesla CEO Elon Musk, which has made its mark in this industry-wide race. xAI recently received a total investment of about $6 billion to develop the next generation of AI chatbot Grok, directly challenging competitors such as OpenAI's GPT-4 and Google's Gemini.

Despite critics arguing that xAI is temporarily lagging behind its peers in terms of technology, the company has shown its ambitions by upgrading its new model, Grok 1.5. Musk pointed out that in order to train the next generation of "Grok 2", xAI's demand for Nvidia's cutting-edge chips will reach a staggering 100,000 units. Experts believe that xAI is expected to further improve its AI model with the help of the huge user data of Musk's social platform X, which has 400 million users, and provide solid support for its future development.

What challenges does NVIDIA face?

Although Nvidia is in a booming growth phase, it still faces a range of challenges, including high investor expectations, potential market saturation risks, supply chain instability, and pressure from strong competitors such as AMD and Intel.

Over-reliance on the AI chip market can cause Nvidia's stock price to fluctuate in times of market demand or technological change. In order to maintain its technology and market leadership, NVIDIA needs to continue to invest heavily in R&D. In addition, the application of AI technology may raise public concerns about privacy protection and job loss, which could affect the market's perception and sentiment towards companies such as Nvidia.

However, the surge in demand for AI chips is driving Nvidia to innovate and lead the way in technological advancement. For investors, Nvidia's sales growth and market dominance are expected to lead to an increase in the share price, which will provide them with significant returns. Nvidia's rise highlights the transformative impact of AI on the market, and the rise in its share price signals a shift to AI-driven growth.

In a report to clients, Ed Yardeni, founder of Yardeni Research, delved into NVIDIA's significant strengths in the rapidly evolving graphics processing unit (GPU) technology, emphasizing that "companies seeking breakthroughs and leading in the field of artificial intelligence inevitably rely on NVIDIA's expensive but indispensable GPU chips." "NVIDIA's well-designed GPU semiconductor chips are built to provide a strong driving force for artificial intelligence. (Compiler/Golden Deer)

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