Nvidia’s Meteoric Rise: AI Chipmaker Nears Apple’s Market Value

Edited by: Fern Sidman

On Tuesday, Nvidia’s shares experienced a significant rally, rising by approximately 6% to reach an all-time high. This surge brought the AI chipmaker’s stock market value tantalizingly close to overtaking Apple’s, positioning Nvidia as a potential new leader among Wall Street’s elite companies, according to a report in The New York Post.  Nvidia’s market capitalization climbed to an impressive $2.8 trillion, just shy of Apple’s $2.9 trillion, which currently holds the position of the second-most valuable company on Wall Street after Microsoft.

During the trading session, Nvidia’s stock soared to an intra-day record high of $1,149.39, marking an 8% increase at its peak. By contrast, Apple’s stock experienced a slight dip, falling by 0.2% in afternoon trading, the Post reported. This juxtaposition of Nvidia’s rapid ascent and Apple’s slight decline highlights the shifting dynamics in the tech sector, where Nvidia’s advancements in AI technology are capturing significant investor interest.

Nvidia’s recent stock performance can be attributed to several key factors. Last week, the company forecasted second-quarter revenue that surpassed Wall Street’s expectations, sparking a wave of investor enthusiasm. Additionally, Nvidia announced a stock split, a move that typically excites investors as it often makes shares more accessible and signals confidence in continued growth. Since this announcement, according to the information provided in The Post report.  Nvidia’s shares have surged nearly 13%, reinforcing the company’s status as the “AI poster child.”

Derren Nathan, head of equity analysis at Hargreaves Lansdown, commented on Nvidia’s impressive growth trajectory, noting that the market has struggled to keep pace with the company’s continuous improvements. “At a mid-thirties forward earnings multiple, this still doesn’t feel like bubble territory,” Nathan told the Post, as he highlighted the relatively stable valuation metrics despite the rapid stock price increase.

According to LSEG data, Nvidia’s shares recently traded at 36 times its forward profit estimates. This is in comparison to 38 times for Advanced Micro Devices (AMD) and 21 times for Intel, indicating that while Nvidia’s valuation is high, it is not entirely out of line with industry peers. As per the information contained in The Post report, Nvidia’s forward profit estimates reflect the market’s confidence in its ability to maintain and expand its leadership in the AI chip market, where demand for high-performance computing and AI capabilities continues to grow.

The company’s stock has more than doubled so far this year, following a more than threefold increase last year. The report in The Post suggested that this remarkable growth trajectory is a testament to Nvidia’s strategic positioning in the burgeoning AI sector, where its advanced chip technologies are driving significant innovation and application across various industries.

Investment analyst Dan Coatsworth from AJ Bell encapsulated the market sentiment perfectly, telling The Post, “Business is doing incredibly well, there are so many opportunities to keep growing, and the AI theme still has legs. When the song is that catchy, investors want to keep humming it all day long.” This enthusiasm is evident in Nvidia’s stock rally, which continues to capture the imagination of investors who see limitless growth potential in AI technology.

The AI boom has undeniably positioned Nvidia as a central player in the tech industry. Its chips are pivotal for AI applications, driving advancements in machine learning, data analytics, and various AI-driven technologies, the Post report explained. This demand surge has translated into impressive financial performance, with Nvidia’s data center revenue skyrocketing as tech giants invest heavily in AI infrastructure.

In contrast, Apple, once the darling of Wall Street, has struggled to keep pace with the rapid advancements in AI technology. This year, Apple’s stock has underperformed compared to other Big Tech firms, experiencing a decline of around 2%. The company faces challenges with weak iPhone demand and intense competition in China, impacting its overall market performance, the report in The Post revealed. Furthermore, Apple has been slower to adopt generative AI technologies, which create human-like responses to written prompts. Rivals such as Microsoft and Google have already integrated these capabilities into their products, giving them a competitive edge.

Microsoft’s strategic investments in AI have paid off handsomely. Earlier this year, Microsoft overtook Apple to become the world’s most valuable company, propelled by significant gains from its AI-driven innovations across cloud services, the report in The Post added.  Despite a slight dip of 0.4% in its shares on Tuesday, Microsoft maintains a formidable market value of $3.1 trillion, showcasing its leadership in the tech sector.

The competition for AI dominance is fierce, with companies racing to secure Nvidia’s high-end chips that are essential for advanced AI computations. The Post reported that major technology companies such as Alphabet, Microsoft, and Amazon.com are fiercely competing for a limited supply of Nvidia’s cutting-edge chips, as they strive to dominate the AI computing landscape.

Nvidia’s ability to meet this demand and deliver innovative solutions has positioned it as a key enabler of AI advancements. This success is not just reflected in its financial metrics but also in the strategic maneuvers of tech giants vying to leverage its technology.