On Tuesday, Nvidia overtook Microsoft as the most valuable business in the world, thanks in large part to its high-end processors, which are crucial in the quest to dominate artificial intelligence innovations.
Just a few days after surpassing Apple, the iPhone maker, to become the second most valuable business, the chipmaker’s shares increased 3.5% to $135.58, increasing its market value to $3.335 trillion.
Microsoft’s shares fell 0.45%, bringing its stock market value down to $3.317 trillion.
Meanwhile, Apple’s share price decreased by more than 1% to bring its total market value to $3.286 trillion.
The extraordinary increase in Nvidia’s market capitalization over the last 12 months has come to represent a Wall Street hysteria sparked by hope for the future of artificial intelligence.
Although the S&P 500 and Nasdaq reached all-time highs thanks to Nvidia’s surge, some investors are concerned that unchecked euphoria about artificial intelligence (AI) may fade if indications of a slowdown in expenditure on the technology emerges.
“It’s Nvidia’s market; we’re all just trading in it,” Steve Sosnick, chief market strategist at Interactive Brokers, had said.
According to LSEG statistics, Nvidia has also emerged as the most traded company on Wall Street, with an average daily turnover of $50 billion, compared to about $10 billion for Apple, Microsoft, and Tesla. Currently, the chip maker represents around 16% of total S&P 500 companies trades.
While Microsoft’s stock has increased by around 19% this year, Nvidia’s price nearly tripled as a result of demand for its top-tier chips exceeding supply.
Alphabet, the parent company of Google, Microsoft, and Meta Platforms are all in competition with each other to develop AI computing capabilities and incorporate the technology into what they offer.
Since Nvidia’s AI chips are so much sought after and are thought to be far better than those of its rivals, there is a shortage of them.
In the eyes of many investors, Nvidia is the biggest beneficiary of the current surge in AI development.
Oliver Pursche, senior vice president at Wealthspire Advisors in New York, said, “Nvidia has been getting a lot of positive attention and has been doing a lot of things very correctly, but a small misstep is likely to cause a major correction in the stock, and investors should be careful.”
With Tuesday’s increase, Nvidia’s market capitalization increased by almost $110 billion, bringing its stock to a record high.
In just nine months, the company’s market worth increased from $1 trillion to $2 trillion in February, and it took slightly more than three months to reach $3 trillion in June.
With demand for its graphics chips far exceeding supply as companies scramble to integrate AI applications, the company has continually exceeded Wall Street’s high expectations for revenue and earnings since its explosive prediction nearly a year ago.
It was in May when Nvidia officials stated that demand for their Blackwell AI processors would outpace supply “well into next year.”
Nvidia’s stock has gained dramatically, but analyst estimates for its future profits have sharply increased faster, which has caused a decline in the firm’s earnings value.
According to LSEG statistics, Nvidia was trading at 44 times forecast profits as of late, down from over 84 approximately a year ago.
Nvidia split its shares 10 for 1 last week, making its highly valued stock more appealing to individual investors.
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