Nvidia vaults past Apple and Microsoft to become world’s most valuable company
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Nvidia is now the top publicly traded company in the world, surpassing Microsoft and Apple. This happened due to an increase in the value of its shares caused by high demand for its chips and a buzz among investors surrounding artificial intelligence.
On Tuesday, the stock value of the company rose 3.5% to reach $135.58, which escalated its overall market value to $3.335tn. As a result, the firm has now outdone the two well-known tech giants that were constantly striving for the top place in the US stock exchange.
The popularity of advanced chips that can operate and train complex artificial intelligence models like OpenAI's ChatGPT has greatly benefited Nvidia. In just under two years, Nvidia has risen from a company valued at $300 billion that was struggling with an oversupply of chips due to a drop in cryptocurrency demand, to becoming one of the most influential tech companies globally. Other significant tech firms are eager to obtain the latest products offered by Nvidia.
The substantial increase in its stock price has significantly contributed to one-third of the S&P 500 index's higher level, which is at 14% from the start of the year. This uptrend is causing surprise, even to those who have positive expectations.
Ted Mortonson, who works as a tech strategist at Baird, stated that the sudden increase in Nvidia's stocks is due to human emotion and not logical reasoning. He acknowledged that Nvidia is a great company and there are many factors that could be driving this increase in the stock price. However, seeing the stock price rise by 40% in just a month is not common and could be attributed to animal spirits rather than factual analysis.
Established three decades ago with the goal of producing PC graphics cards catering to the needs of video game enthusiasts, this company headquartered in Silicon Valley has been experiencing remarkable growth in revenue over the past year, with each quarter surpassing the previous one. In February, it revealed an impressive year-on-year increase of 265%, which was then followed by another noteworthy jump of 262% in May. As a result, its stocks have surged by approximately 170% since the beginning of the year.
The CEO of Nvidia, Jensen Huang, has proposed that the company is leading a new "industrial revolution". Through the use of generative artificial intelligence, they aim to revolutionize all fields of the world economy with smart computing technology.
Tech giants Google, Microsoft, and Amazon have all invested in Nvidia's "Hopper" series of graphic processing units to enhance their cloud services. The supremacy of Nvidia is solidified by its Cuda software ecosystem, which supplies developers with necessary tools when using their chips.
Nvidia is introducing its most recent and more dynamic "Blackwell" chips, while Huang commits to a yearly launch of fresh models. AMD and Intel are also producing their own rival AI chips, but they have not yet reduced Nvidia's immense dominance in the market.
According to chip analyst Stacy Rasgon of Bernstein, someone has to hold the top position, and the rise in Nvidia's stock value is not solely due to its own performance, but the financials behind it. Rasgon notes that he has never witnessed a situation where the actual economics driving the growth are as remarkable as they are now. It is truly impressive.
The competition to take advantage of generative AI's potential has spread throughout the technology industry. During its yearly developers conference, Apple announced it would be including its own set of generative models in its latest operating systems and also formed a huge partnership agreement with OpenAI.
Many people are worried that Nvidia's increasing influence over wider stock indices might lead to the market rally being unsustainable in the long run. However, not many investors or analysts believe that a sudden reversal of the situation is likely to happen anytime soon.
Out of the 72 analysts who were monitored by Bloomberg regarding Nvidia, only one of them gave a negative review of the company's stocks.
The current situation of the market being dominated by only a few companies is causing concern. We are experiencing a level of concentration that hasn't been seen since 1999, which is a troublesome issue. These statements were made by Hans Olsen, who holds the position of chief investment officer at Fiduciary Trust, a wealth management company that holds assets worth $23 billion.
"If we reflect on the technology bubble that occurred from 1997 up until March 2000, it lasted for quite a while. According to him, this current situation has the potential to last as well."
Nvidia has accomplished a historical feat as it now sits in the leading position of the S&P 500. This achievement is particularly impressive, considering only eleven other corporations have managed to hold this position since 1926. For the better part of the last ten years, Apple and Microsoft have been neck and neck, fighting for the title of the most valuable company in the US, and frequently, even the world. However, in 2011, ExxonMobil was the last company to surpass both Apple and Microsoft in value, making this a significant milestone for Nvidia.
