Nvidia surpasses Microsoft as world’s most valuable company
Nvidia became the world’s most valuable company on Tuesday, dethroning tech giant Microsoft as the company’s advanced processors play a central role in the battle for dominance in artificial intelligence technology.
Shares of the chipmaker rose 3.5 percent to $135.58, taking its market capitalisation to $3.335 trillion (roughly Rs. 2,78,15,901 crore), just days after it overtook iPhone maker Apple to become the second-most valuable company.
Microsoft’s market cap hit $3.317 trillion, while shares fell 0.45 percent.
Apple shares fell more than 1 percent, bringing their value to $3.286 trillion.
Nvidia’s massive rise in market value over the past year is emblematic of the frenzy on Wall Street, which is driven by optimism about emerging AI technology.
While Nvidia’s rally has pushed the S&P 500 and the Nasdaq to record highs, some investors worry that the rampant optimism about AI could evaporate amid signs of a slowdown in spending on the technology.
“It’s Nvidia’s market; we all trade it,” said Steve Sosnick, chief market strategist at Interactive Brokers.
Nvidia has also become by far the most traded company on Wall Street, with an average of $50 billion in daily turnover, compared with about $10 billion each for Apple, Microsoft and Tesla, according to LSEG data. The chipmaker now accounts for about 16 percent of all S&P 500 company trading.
Nvidia’s shares have nearly tripled so far this year, compared with a roughly 19 percent rise in Microsoft’s shares, as demand for top-tier processors outstrips supply.
Tech giants Microsoft, Meta Platforms and Google-owner Alphabet are competing to expand their AI computing capabilities and add the technology to their products and services.
The insatiable demand for Nvidia’s AI processors, which are considered far superior to those of the competition, has made them scarce. Many investors see Nvidia as the biggest winner yet from the growing AI development.
“Nvidia is getting a lot of positive attention and doing a lot of things very well, but a small misstep could quickly cause a large correction in the stock price, and investors should be cautious,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York.
Tuesday’s gains sent Nvidia’s shares to a record high, boosting its market cap by more than $110 billion — the same as the entire value of Lockheed Martin.
The company’s market value grew 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 beating its revenue and profit forecasts about a year ago, the company has consistently exceeded Wall Street’s lofty revenue and profit expectations. Demand for graphics processors has far outstripped supply as companies look to quickly implement AI applications.
Nvidia executives said in May that demand for its Blackwell AI chips could outstrip supply “well into next year.”
Analysts’ expectations for Nvidia’s future earnings have risen sharply, outpacing the strong rise in stock prices. This has led to a decline in the stock’s earnings valuation.
Data from LSEG shows Nvidia recently traded at 44 times expected earnings, down from more than 84 times a year ago.
To increase the attractiveness of its highly valued stock among retail investors, Nvidia last week split its shares 10-for-1.
© Thomson Reuters 2024
