With its high-end processors playing a key part in a race to dominate artificial intelligence technology, Nvidia overtook computer giant Microsoft to become the most valuable business in the world on Tuesday.
Just a few days after surpassing Apple, the maker of the iPhone, to become the second most valuable corporation, the chipmaker’s shares increased 3.5% to $135.58, increasing its market capitalization to $3.335 trillion.
Microsoft’s shares fell 0.45%, bringing its stock market worth down to $3.317 trillion.
Apple’s market capitalization decreased by more than 1% to $3.286 trillion.
The extraordinary increase in Nvidia’s market capitalization over the last 12 months has come to represent a Wall Street panic sparked by hope for the future of artificial intelligence.
While the Nasdaq and S&P 500 have reached all-time highs thanks to Nvidia’s gain, some investors are concerned that unfettered euphoria about artificial intelligence (AI) will dissipate if signs of a slowdown in expenditure on the technology surface.
“We’re all just trading in it; it’s Nvidia’s market,” stated Interactive Brokers chief market strategist Steve Sosnick.
Laptops 1000Based on LSEG data, Nvidia has emerged as the most traded business on Wall Street, with an average daily turnover of $50 billion, compared to roughly $10 billion for Apple, Microsoft, and Tesla.
Currently, the chip manufacturer represents roughly 16% of total S&P 500 Company trading.
While Microsoft’s stock has increased by roughly 19% this year, Nvidia’s price has nearly tripled as a result of demand for its top-tier processors exceeding supply.
Tech behemoths Alphabet, owner of Google, and Microsoft, Meta Platforms, are vying to develop their AI computing skills and incorporate the technology into their goods and services.
Since Nvidia’s AI chips are so much sought after and are thought to be far better than those of its rivals, there is a shortage of them. In the eyes of many investors, Nvidia is the biggest beneficiary of the current surge in AI development.
Oliver Pursche, senior vice president at Wealthspire Advisors in New York, said, “Nvidia has been getting a lot of positive attention and has been doing a lot of things very correctly, but a small misstep is likely to cause a major correction in the stock, and investors should be careful.”
The increase on Tuesday helped Nvidia’s stock reach a record high and increased its market capitalization by almost $110 billion, which is equal to the whole market value of Lockheed Martin.
In just nine months, the company’s market worth increased from $1 trillion to $2 trillion in February, and it took slightly more than three months to reach $3 trillion in June.
With demand for its graphics chips far exceeding supply as businesses scramble to embed AI applications, the company has routinely blown past Wall Street’s high expectations for revenue and earnings since its explosive prediction nearly a year ago.
In May when Nvidia executives stated that demand for their Blackwell AI processors would outpace supply “well into next year.”
Nvidia’s stock has gained dramatically, but analyst estimates for its future earnings have sharply increased faster, which has caused a decline in the firm’s earnings valuation.
According to LSEG data, Nvidia was trading at 44 times forecast earnings as of late, down from over 84 approximately a year ago.
Nvidia divided its shares 10 for 1 last week, making its highly valued stock more appealing to individual investors.
