Nvidia Is Now More Valuable Than Apple

Nvidia is now more valuable than Apple, making it the number 2 most valuable company in the world just behind Microsoft. Why is this happening?

You read that right: Nvidia is now more valuable than Apple. The tech landscape is witnessing a seismic shift as Nvidia, the renowned artificial intelligence (AI) chipmaker, has surpassed Apple's market value to become the world's second most valuable company.

Nvidia Is Now More Valuable Than Apple

This remarkable feat underscores Nvidia's dominance in the AI sector and marks a pivotal change in Silicon Valley's hierarchy, which has been under Apple's reign since the launch of the iPhone in 2007.

Nvidia's Meteoric Rise

On Wednesday, Nvidia's stock soared to unprecedented heights, closing at US$1,224.40 and pushing the company's valuation to an astounding US$3.012 trillion. This surge allowed Nvidia to eclipse Apple's market capitalisation, which stood at US$3.003 trillion after a modest 0.8% increase in its stock price.

The AI Boom

Nvidia's rapid ascent can be attributed to its strategic focus on AI technology. Unlike Apple and Meta, which are heavily investing in AI development, Nvidia is already reaping substantial profits from its AI ventures. This distinction has not gone unnoticed by investors, who have flocked to Nvidia's stock, perceiving it as a promising investment opportunity.

Jake Dollarhide, CEO of Longbow Asset Management, emphasised this point, stating, "Nvidia is making money on AI right now, and companies like Apple and Meta are spending on AI." This highlights how Nvidia's immediate profitability contrasts with other tech giants' ongoing investments.

Stock Split Announcement

In a move designed to attract individual investors, Nvidia is preparing for a ten-for-one stock split, effective June 7. This decision is expected to make the stock more accessible and potentially increase its appeal among retail investors.

Market Performance and Projections

Nvidia's stock has experienced a phenomenal 147% increase in 2024 alone. This incredible surge can be attributed to the soaring demand for its cutting-edge processors, which are essential for AI applications. Tech giants like Microsoft, Meta Platforms, and Google-owner Alphabet are in a race to enhance their AI computing capabilities, further fuelling demand for Nvidia's products.

Since May 22, when Nvidia released its latest impressive revenue forecast, the company's stock has rallied nearly 30%. On Wednesday alone, Nvidia's market capitalisation surged by almost US$150 million—more than the entire value of AT&T.

Broader Market Impact

The broader optimism surrounding AI also benefited chip stocks on Wednesday. The PHLX chip index jumped 4.5%, and Super Micro Computer, which sells AI-optimised servers featuring Nvidia chips, saw its stock climb by 4%. This ripple effect illustrates the growing confidence in AI technology and its potential to revolutionise various industries.

CEO Jensen Huang's Rising Popularity

Nvidia CEO Jensen Huang has become a prominent figure in the tech world. His recent appearance at the Computex tech trade fair in Taipei garnered extensive media coverage in Taiwan, where he was born before moving to the US. Huang's presence at the event drew significant attention and admiration from attendees, further cementing his status as a visionary leader in the tech industry.

Challenges for Apple

While Nvidia rides the wave of AI enthusiasm on Wall Street, Apple faces several challenges. Weak demand for iPhones and fierce competition in China—the world's largest smartphone market—have hindered Apple's growth. Additionally, some investors perceive Apple as lagging behind other tech giants in integrating AI features into their products and services.

Market Perception

The perception that Apple is falling behind in the AI race is critical. Investors are becoming increasingly focused on AI capabilities as they seek to identify future winners in the tech sector. Apple's current struggles highlight the importance of staying ahead in technological advancements to maintain market leadership.

Future Earnings and Valuation

Despite its remarkable stock gains, analysts' projections for Nvidia's future earnings have outpaced even these stellar performances. Currently trading at 39 times expected earnings, Nvidia is considered less expensive on that basis than it was a year ago when it traded at over 70 times expected earnings, according to LSEG data.

This indicates that while Nvidia's stock price has surged, its earnings potential has increased even more rapidly, making it a relatively attractive investment compared to a year ago.

Potential for Further Growth

Given Nvidia's current trajectory and the ongoing demand for AI technology, it is conceivable that the company could continue its upward momentum. Some analysts predict that Nvidia might even surpass Microsoft to become the world's most valuable company if current trends persist.

Conclusion

Nvidia's ascendancy to become the world's second most valuable company underscores the transformative power of AI technology. As Nvidia continues to capitalise on its AI prowess, it remains poised to potentially overtake Microsoft and solidify its position as a dominant force in Silicon Valley.

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