Bengaluru, India – Nvidia’s rapid ascent in the market has positioned the semiconductor company as a formidable competitor to Apple for the title of the world’s second-most-valuable company. Investors are flocking to Nvidia, drawn to the company’s cutting-edge chips that power popular artificial intelligence tools like ChatGPT.
In just nine months, Nvidia’s market valuation has skyrocketed from $1 trillion to over $2 trillion, surpassing giants like Amazon, Google-parent Alphabet, and Saudi Aramco along the way. With a market capitalization of around $2.38 trillion, Nvidia is now within striking distance of Apple, trailing the tech giant by roughly $230 billion, and Microsoft by about $645 billion.
The relentless surge in Nvidia’s shares, driven by its dominance in the high-end AI chip market, has not only propelled the company’s valuation but has also played a significant role in pushing Wall Street to record highs this year. This surge has also boosted Nvidia’s weighting on the benchmark S&P 500 index to over 5%.
As Nvidia continues to outperform, along with other tech giants like Meta Platforms, it underscores investors’ growing appetite for AI-related investments. While Apple faces challenges with slowing iPhone sales, Nvidia’s momentum remains strong, reflected in its 95% rise in share value this year.
Experts like Richard Meckler from Cherry Lane Investments point to the strong fundamentals of Nvidia’s business model as a driver for its remarkable rally. Long option buyers are also fueling speculation around the stock’s future trajectory, given its upward trajectory throughout the year.
Despite its exceptional performance, there are suggestions that Nvidia’s stock may be approaching a peak. Analysts’ median target price over the next 12 months indicates a potential pullback in the stock’s price. However, with analysts raising profit estimates and ongoing investor optimism, the company may be able to sustain its elevated stock price.
Looking ahead, portfolio manager David Wagner from Aptus Capital Advisors believes Nvidia remains undervalued compared to its peers in the AI sector. He anticipates significant growth in the industry in the years to come, positioning Nvidia favorably for long-term success.
While the future outlook for Nvidia is optimistic, there are factors to consider regarding the sustainability of its current valuation. With the law of large numbers looming and the stock nearing its peak, the company will need to continue exceeding analyst expectations to support its elevated stock price in the long run.