by NEW YORK: NVIDIA has become the world’s most valuable company thanks to a staggering rise in its share price, highlighting how investors believe artificial intelligence will play a huge role in the global economy in the coming years. Nvidia shares rose 3.5% on Tuesday (June 18), giving it a market capitalization of about $3.34 trillion. The semiconductor pioneer overtook Microsoft and Apple, which had been vying for the top spot in recent days.
Nvidia’s rise in market value has been driven by demand for its chips, which represent the gold standard in artificial intelligence (AI). The company’s shares have risen more than 170% this year and are up about 1,100% from their lows in October 2022. The staggering profits and growing investor enthusiasm for AI are fueling Nvidia’s recovery. This enthusiasm is reflected in the company’s market value, which rose from $2 trillion to $3 trillion in just 96 days. Microsoft, one of the other two companies to reach those lofty heights, took 945 days to jump from $2 trillion to $3 trillion, while Apple took 1,044, according to Bespoke Investment Group.
Only 11 U.S. companies have held the top market cap position by closing price since 1925, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. For the former front-runners, fortunes have diverged in recent decades. Microsoft rose to the top in the late 1990s, but its shares languished for years in the early 2000s after the dot-com bubble, before rebounding strongly in the latter part of the decade. ExxonMobil became the world’s most valuable company in the 2000s, but its shares fell as oil prices fell. For some, Cisco is a warning sign. The company’s shares peaked at more than $80 in March 2000 at the height of the dot-com boom, and investors often gave Internet-related companies dizzying valuations.
Bespoke analysts recently compared Cisco’s developments to those of Nvidia, whose products were seen as essential to supporting Internet infrastructure. “NVDA is performing incredibly well, but the company must continue to grow from here and fend off competition for the stock to continue delivering superior returns,” Bespoke said in a recent note. Right now, NVIDIA’s profits are supporting the stock. Revenues have more than tripled in the most recent quarter, now reaching $26 billion, while net income has increased seven-fold to $14.9 billion.
Revenues are expected to nearly double to $120 billion this fiscal year, and are expected to grow another 33% to $160 billion in fiscal 2026, according to LSEG data. Despite the stock’s rise due to Nvidia’s impressive financial performance and forecasts, the stock valuation has fallen by several measures. For example, NVIDIA’s price-to-earnings ratio was recently 43, according to LSEG Datastream. That’s higher than the level of 25 it started the year with but lower than it reached for most of last year. By comparison, the S&P 500’s price-to-earnings ratio is 21. While NVIDIA has been a standout performer, it’s not the only stock benefiting from excitement about AI’s potential profitability. Shares of other technology companies, including Supermicro Computer Inc. and Arm Holdings Inc., have also soared this year.
