Nvidia has surged to become the world’s most valuable company, underscoring the outsized role artificial intelligence (AI) is expected to play in the global economy in the coming years. This remarkable ascent was marked by a staggering rally in its shares, pushing its market value to approximately $3.33 trillion.
On Tuesday, Nvidia shares rose about 3%, surpassing Microsoft and Apple, which had been competing for the top spot. The surge in Nvidia’s market value has been driven by a robust demand for its chips, which are considered the gold standard in the AI space. Consequently, Nvidia’s shares have skyrocketed by more than 170% this year, and about 1,100% since their October 2022 low.
The company’s blockbuster earnings and broadening investor enthusiasm over AI have significantly fueled Nvidia’s rally. This fervour is evident in Nvidia’s market value, which skyrocketed from $2 trillion to $3 trillion in just 96 days. In comparison, Microsoft took 945 days and Apple took 1,044 days to make a similar leap, according to Bespoke Investment Group.
Historically, only 11 U.S. companies since 1925 have reached the top spot in market value on a closing basis, notes Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. The fortunes of past holders of this top position have varied significantly over the decades. For instance, Microsoft reached the top spot in the late 1990s but then struggled during the early 2000s post-dotcom bubble, only to regain momentum in the latter half of the last decade. Exxon Mobil (XOM.N) achieved the No. 1 spot in the 2000s but faced a retreat in its shares following a downturn in oil prices.
Cisco serves as a cautionary tale, with its shares peaking over $80 in March 2000 during the dotcom boom. Investors then assigned dizzying valuations to internet-related companies, a stark reminder of the potential volatility in tech markets.
Bespoke’s analysts have recently compared Nvidia’s trajectory to Cisco’s, highlighting the essential role of Nvidia’s products in supporting AI infrastructure. “Nvidia’s run has been incredible, but it will need to keep growing and stave off competition if its stock is going to keep putting up stellar returns,” Bespoke noted in a recent analysis.
Currently, Nvidia’s earnings are robustly supporting its stock price. The company’s revenue more than tripled to $26 billion in the latest quarter, while net income jumped seven-fold to $14.9 billion. According to LSEG data, revenue for the current fiscal year is expected to roughly double to $120 billion and then rise another 33% in fiscal 2026, reaching $160 billion.
Despite the surge in share price, Nvidia’s impressive financial performance has led its stock valuation to moderate by some measures. For instance, Nvidia’s forward price-to-earnings ratio was recently at 43, higher than the 25 level at the start of the year but below last year’s levels. In contrast, the S&P 500 trades at 21 times earnings.
While Nvidia stands out as the top performer, it isn’t the only stock benefiting from the AI profit potential. Shares of other technology companies, including Super Micro Computer and Arm Holdings, have also seen significant increases this year.
Nvidia’s meteoric rise highlights the profound impact AI is expected to have on the tech industry and global markets, cementing its status as a key player in the evolving digital economy.
