Nvidia is quickly closing in on Apple to claim the title of the world’s second-most valuable company, fueled by an insatiable demand for its semiconductors.
These chips, pivotal in running AI tools like ChatGPT, have propelled Nvidia’s valuation from $1 trillion to over $2 trillion in just nine months, surpassing giants such as Amazon, Alphabet, and Saudi Aramco.
With a market cap nearing $2.38 trillion, Nvidia is just behind Apple and Microsoft in valuation.
This surge has not only elevated Wall Street to new heights but also significantly influenced the S&P 500 index, where Nvidia now boasts a weightage of more than 5%.
The company, holding an 80% share in the high-end AI chip market, has seen its stock rise by 95% this year, outshining other tech giants and reflecting the market’s growing fascination with AI.
“Nvidia’s rally reflects the incredibly strong fundamentals underlying its current business model,” remarked Richard Meckler, a partner at Cherry Lane Investments.
He also noted the speculative interest in Nvidia, highlighting its appeal among options buyers who have witnessed its almost continuous upward trajectory in 2024.
Apple, meanwhile, has experienced a slowdown in iPhone sales, leading to its overtaking by Microsoft as the most valuable U.S. company earlier this year—a position it hadn’t relinquished since 2021. Nvidia has also become Wall Street’s most traded stock, surpassing Tesla.
Despite the impressive stock performance, Nvidia’s forward price-to-earnings ratio remains relatively modest at 36.6, especially when compared to its competitors, indicating analysts’ optimism about its profit projections.
“Nvidia is in fact the cheapest of the ‘AI narrative’ stocks out there,” stated David Wagner, a portfolio manager at Aptus Capital Advisors.
He predicts the industry will expand significantly in the coming years.
Yet, some indicators suggest Nvidia’s stock might be approaching its zenith, with analysts predicting a target price below its recent close.
“But the stock price could remain at these levels if the company can continue to meet or exceed the high expectations of analysts,” added Meckler, acknowledging the challenges of sustaining such rapid growth for a mega-cap stock.