Nvidia (NVDA.O) has become the world’s most valuable company, surpassing Microsoft (MSFT.O), as its advanced processors are pivotal in the race to dominate artificial intelligence (AI) technology. The chipmaker’s shares rose by 3.5% to $135.58, pushing its market capitalization to $3.335 trillion, shortly after overtaking Apple (AAPL.O) to become the second most valuable company. Meanwhile, Microsoft’s market value stood at $3.317 trillion, and Apple’s at $3.286 trillion following slight declines in their stock prices.
Nvidia’s dramatic increase in market value over the past year highlights a Wall Street surge fueled by enthusiasm for emerging AI technology. Although Nvidia’s rise has boosted the S&P 500 (.SPX) and Nasdaq (.IXIC) to record levels, some investors are wary that this enthusiasm may wane if there is a slowdown in AI spending. Steve Sosnick, chief market strategist at Interactive Brokers, commented, “It’s Nvidia’s market; we’re all just trading in it.”
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Nvidia has also become the most traded company on Wall Street, with an average daily turnover of $50 billion, significantly higher than the $10 billion average for Apple, Microsoft, and Tesla (TSLA.O), according to LSEG data. Nvidia now accounts for about 16% of all trading in S&P 500 companies. The company’s stock has nearly tripled this year, compared to a 19% rise in Microsoft shares, driven by demand for its high-end processors.
Tech giants like Microsoft, Meta Platforms (META.O), and Alphabet (GOOGL.O) are competing to enhance their AI capabilities, relying heavily on Nvidia’s processors, which are regarded as superior to competitors’ offerings. The high demand for Nvidia’s AI processors has led to a tight supply, positioning Nvidia as a significant beneficiary of the AI boom.
However, investors are cautioned about potential volatility. Oliver Pursche, senior vice president at Wealthspire Advisors, noted that while Nvidia has received positive attention for its strategic moves, any minor misstep could lead to a substantial stock correction. Nvidia’s stock hit a record high on Tuesday, adding over $110 billion to its market capitalization, equivalent to the entire value of Lockheed Martin (LMT.N).
Nvidia’s market value surged from $1 trillion to $2 trillion in nine months as of February and then reached $3 trillion in just over three months by June. The company has consistently exceeded Wall Street’s revenue and profit expectations due to high demand for its graphics processors, with executives predicting continued strong demand for its Blackwell AI chips well into the next year.
Sharp increases in analysts’ expectations for Nvidia’s future earnings have outpaced its stock gains, reducing the stock’s earnings valuation. Nvidia recently traded at 44 times expected earnings, down from over 84 a year ago, according to LSEG data. To further attract individual investors, Nvidia recently split its stock 10-for-one.
