Nvidia’s stock soared to record highs on Wednesday, propelling the artificial intelligence chipmaker’s valuation past the $3 trillion mark and surpassing Apple to become the world’s second
most valuable company
.
Nvidia
is also preparing to split its stock ten-for-one, effective June 7, a move aimed at increasing its appeal to individual investors.
The surge in Nvidia’s market value above Apple’s marks a significant shift in Silicon Valley, where Apple, co-founded by Steve Jobs, has dominated since the iPhone’s launch in 2007.
Nvidia’s stock rose 5.2% to close at $1,224.40, valuing the company at $3.012 trillion. Meanwhile, Apple’s market capitalization stood at $3.003 trillion after its stock climbed 0.8%.
“Nvidia is making money on AI right now, and companies like Apple and Meta are spending on AI,” said Jake Dollarhide, chief executive officer at Longbow Asset Management. “It may be a foregone conclusion that Nvidia will overtake Microsoft as well. There’s a lot of retail money that’s piling in on what they see as a straight shot up.”
Nvidia’s stock has surged 147% so far in 2024, driven by soaring demand for its top-of-the-line processors. These processors are essential as Microsoft, Meta Platforms, and Google-owner Alphabet race to build out their AI computing capabilities and dominate the emerging technology. The company’s stock has rallied nearly 30% since May 22, following a stellar revenue forecast.
Nvidia added nearly $150 million in market capitalization on Wednesday alone, more than the entire value of AT&T. The optimism surrounding AI also lifted chip stocks broadly, with the PHLX chip index surging 4.5%. Super Micro Computer, which sells AI-optimized servers built with Nvidia chips, climbed 4%.
Nvidia CEO Jensen Huang recently received extensive media coverage in Taiwan and was greeted enthusiastically at the Computex tech trade fair in Taipei. Meanwhile, Apple is facing challenges with weak demand for iPhones and stiff competition in China, the world’s largest smartphone market. Some investors view Apple as lagging behind other tech giants in integrating AI features into their products and services.
Despite Nvidia’s impressive gains, analysts’ projections for its future earnings have outpaced its stock performance. Nvidia is currently trading at 39 times expected earnings, a significant reduction from a year ago when it traded at over 70 times expected earnings, according to LSEG data.
Nvidia’s rise to AI prominence
The chipmaker has seen a dramatic increase in demand for its semiconductors, which are crucial for powering AI applications. Nvidia’s revenue more than tripled in the latest quarter compared to the same period a year earlier. Wall Street expects Nvidia to bring in $117 billion in revenue for fiscal 2025, nearly double its revenue for 2024 and more than four times its revenue from the year before.
Nvidia’s estimated net margin stands at 53%, significantly higher than Apple’s 26.3% and Microsoft’s 36.4%. Although
Apple and Microsoft
have higher overall revenues, Nvidia’s profitability underscores its dominant position in the AI market.
Wall Street’s reaction to Nvidia’s milestone
Wall Street stocks closed higher on Wednesday, with the S&P 500 and Nasdaq hitting fresh highs as Nvidia crossed the $3 trillion market capitalization mark. The S&P 500 surged 1.2% to 5,354.03, while the Nasdaq Composite Index rallied 2.0% to 17,187.90. The Dow Jones Industrial Average rose 0.3% to 38,807.33.
“You have kind of the best of both worlds for the stock market in that you have lower interest rates and strength in the mega-cap stocks, specifically, Nvidia,” said Patrick O’Hare of Briefing.com. Other major names, including Meta Platforms, advanced 3.8%, while Hewlett Packard Enterprise bounced 10.7%. Apple shares rose 0.8%.
Economic data showed private sector hiring cooled more than expected in May, potentially giving the Federal Reserve confidence to cut interest rates sooner. All eyes are on the government’s jobs report due Friday for further indications of the economy’s trajectory and potential rate adjustments.
(With inputs from agencies)
