AI fever make Nvidia’s rise to world’s most valuable company
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Nvidia (NVDA. O), opens new tab has emerged as the world’s most valuable company ever after shares in the firm soaring to the record level to highlight investors’ bet on artificial intelligence as the kingmaker of the global economy in the next few years.
Nvidia shares rose 3. Tuesday, completed a secondary public offering of the company’s stocks worth 5 percent to help it get a market value of approximately $3. 34 trillion. That helped place the semiconductor barometer above Microsoft Corporation (MSFT. O), opens new tab and Apple Inc (AAPL. O), opens new tab with which it has been trading places in the recent days.
There has been an increase in Nvidia’s market value due to high demand of its chips; these are state-of-the-art in the AI market. The company’s stocks have it has surged over 170 percent this year while it is up more than 1,100 percent since its low of October 2022.
Big earnings and increased interest from investors in the field of AI are fueling Nvidia’s advance. That intensity has been translated to shareholders’ wealth, where it only took Nvidia 96 days to reach the $3T market capitalization mark.
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Microsoft, one of the two other firms that have touched these dizzying heights, it took Microsoft 945 days to move from $2 trillion to $3 trillion, while Apple took 1,044 days to do the same, Bespoke Investment Group said.
Before the recent crop of spectators, only 11 U. S companies since 1925 attained the apex of market value on closing, as estimated by Howard Silverblatt, the senior index analyst of S&P Dow Jones Indices.
There has been a change of fate for past holders of the top jobs in the last few decades. Microsoft for instance got to the top in the late 1990s but it took its stock many years to get going after the dotcom bubble at the start of this decade before shooting up in the second half of the one that has just passed.
Exxon Mobil (XOM. N), opens new tab attained the world’s most valuable company status in the 2000s but its shares declined when oil prices tumbled.
To some people, Cisco (CSCO. O), opens new tab is the example of the danger of listening to analysts. The company’s shares touched an all-time high of more than $80 in March 2000 at the height of dotcom hysteria when many investors placed speculative and excessively high premiums on any firm or business that was associated with the internet.
In a report that Bespoke’s analysts compiled, they plotted the performance of Nvidia in the market against that of Cisco and pointed out how the later’s products were deemed crucial to the workings of the Internet.
‘NVDA has been on an incredible run, but it will have to continued to expand from here and defend its turf if its equity is going to continue to deliver such strong returns,’ Bespoke in its latest note.
For now, earnings are to sustain the Nvidia’s stock price. Sales reached much higher levels, $26 billion in the latest quarter, and net profit was seven times higher and equal to $14. 9 billion.
LSEG data project revenues for the current fiscal year to increase to $120 billion, from $60 billion previously; and further rise by a third to $160 billion in fiscal 2026.
That is why despite a rather strong growth of Nvidia’s share the company’s stock valuation, according to getsome stocks, has moderated in some respects.
For instance, the last forward P/E for Nvidia as of October 20, 2021, was 43 as LSEG Datastream showed. It is slightly above the 25 level it began the year at but still below the level it was at for most of the year 2011. Unlike that, the S&P 500 index has a P/E ratio of 21.
Although NVIDIA has been the standout over the real winner, it has not been the only stock to advance on sentiments about the MSUs to be realized for AI. Shares of some of the other technology firms such as_super microcomputer technology company (SMIN. L), opens new tab and Arm Holdings, opens new tab have also gone up this year.
