NVIDIA surpasses Apple to become second largest company in market capitalization
The incredible AI-fueled rise in Nvidia’s stock price has boosted the company’s value from $1 trillion to more than $2 trillion in just nine months, overtaking Amazon.com, Google parent Alphabet, and Saudi Aramco in the process.
Nvidia’s market capitalization is currently around $2.38 trillion, about $230 billion behind Apple and about $645 billion behind Microsoft.
Nvidia’s relentless rise in stock price, which controls 80% of the advanced AI chip market, has been instrumental in boosting Wall Street to record levels this year, giving the company a weight of more than 5% in the benchmark S&P 500 index. .
Nvidia, up 95% so far this year, and Meta Platforms, up 46.6%, have also outperformed stocks of other members of the so-called Magnificient 7, highlighting investors’ insatiable appetite for all things AI.
“Nvidia’s rise reflects the incredibly strong fundamentals that underlie its current business model,” said Richard Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey. “It is also finding strong speculative support as the stock is a favorite among long-term options buyers, with a near-linear upward trend throughout 2024.” Meanwhile, Apple, which is struggling with slowing iPhone sales, lost its top spot in U.S. corporate value to Microsoft in January for the first time since 2021.
In recent weeks, Nvidia has replaced Tesla as the most traded stock on Wall Street by value.
Despite the stock’s strength as analysts raised their earnings estimates, the stock’s trailing 12-month price-to-earnings ratio is 36.6, which is lower than a year ago.
In comparison, Intel’s PER was 30.24 and the Philadelphia SE Semiconductor Index’s PER was 39.6, according to LSEG data.
“Nvidia is actually the cheapest of the “AI narrative” stocks,” said David Wagner, portfolio manager at Aptus Capital Advisors.
“We continue to believe that in five or 10 years we will be talking about an industry that is much bigger than the numbers we have today.”
However, there are signs that Nvidia stock is nearing its peak.
Wall Street analysts’ median price target for the next 12 months suggests Nvidia will trade at $850 per share, LSEG data shows. This is lower than the last closing price of $926.
“Of course, it’s very difficult for large-cap prices to continue to rise at this rate because the law of large numbers eventually comes into play, but the company has continued to meet or exceed analysts’ high expectations,” Cherry Lane’s Meckler said.
(Reporting by Medha Singh in Bengaluru; Editing by Anil D’Silva)
