Nvidia, known to be a dominant force in AI chip manufacturing, has climbed to become the third most valuable company in the United States, beating the tech giant Alphabet, Google’s parent company.
The significant shift in rankings was seen on Wednesday, which coincided with the anticipation surrounding Nvidia’s upcoming quarterly report.
Witnessing a considerable surge in its stock price, Nvidia, headquartered in Santa Clara, California, saw its market value soar to $1.825 trillion, marking a historic moment for the company.
In contrast, Alphabet’s market capitalization, although still substantial, stood slightly lower at $1.821 trillion, as its stock experienced a more modest climb of 0.55%.
The Rise
The meteoric rise of Nvidia can be attributed to its vital role as a leading beneficiary of the tech industry’s vigorous pursuit of integrating artificial intelligence, AI into various products and services.
Interestingly, the recent surge in Nvidia’s stock follows closely on the heels of the company surpassing Amazon in market capitalization, a milestone it achieved for the first time in two decades.
At the same time, Amazon, valued at $1.776 trillion, witnessed a notable 1.39% increase in its stock price on the same day.
Nvidia’s dominance in the high-end AI chip market, accounting for approximately 80% of market share, has significantly bolstered its stock performance, with a staggering 47% surge recorded this year alone, following a remarkable tripling in value throughout 2023.
However, the company’s unparalleled success has not been without its challenges, with customers grappling with shortages of Nvidia’s premier components and AI developers encountering lengthy waiting lists to access its processors through cloud-computing providers.
The overarching optimism surrounding AI’s potential has not been limited to Nvidia alone, as evidenced by the surging stock prices of other tech-related behemoths like Microsoft and Meta Platforms.
These companies too have soared to record highs, fueled by investors’ confidence in the transformative power of AI technologies.
Nevertheless, amidst this euphoria, all eyes are now fixed on Nvidia’s forthcoming quarterly report, scheduled for the following Wednesday, which is poised to be one of the most scrutinized events on Wall Street.
Analysts are bracing for yet another stellar quarter from Nvidia, with expectations running high for an impressive outlook. However, some investors caution against complacency, warning that any deviation from these lofty expectations could potentially trigger a significant market correction.
Jake Dollarhide, Chief Executive Officer of Longbow Asset Management in Tulsa, concisely encapsulated this sentiment, emphasizing the precariousness of Nvidia’s position: “The market recognizes Nvidia as the AI king. But if Nvidia has one bad quarterly report, if they don’t overly-exceed investors’ expectations, this thing could sell off 20 or 30 percent in one after-hours session.”
Here’s How High Analysts Project Nvidia’s Stock Could Soar
Nvidia stands out as one of the most coveted tech stocks globally, having generated substantial wealth for its shareholders.
Over the past year, shares of this mega-cap semiconductor designer have skyrocketed by an impressive 241.5%, while boasting an astonishing surge of 15,738% over the last decade.
With a market capitalization of $1.78 trillion, the question that everyone is asking is- How much further can NVDA stock climb within the next 12 months?
A Glimpse into Nvidia’s Profile
Nvidia specializes in providing graphics computing and networking solutions across the United States and various international markets. Its product portfolio caters to diverse sectors including gaming, professional visualization, data center, automotive, among others.
The company distributes its offerings to original equipment manufacturers, system builders, add-in board manufacturers, independent software vendors, cloud service providers, and auto manufacturers.
Nvidia’s Dominance in AI
Artificial intelligence emerges as one of the most prominent megatrends of the present and foreseeable future.
Projections from Statista suggest that the total addressable market for AI-powered products and solutions is poised to surge from $241 billion in 2023 to a staggering $738 billion by 2030, indicating robust annual growth rates exceeding 15%.
Nvidia’s forte lies in designing and supplying AI chips, which has witnessed a surge in demand for these products over the last 15 months.
The exponential rise in demand for AI chips is mirrored by projections from the International Energy Agency (IEA), anticipating a twofold increase in energy consumption by data centers over the next three years.
With data centers currently accounting for 1% of global electricity consumption, as per the IEA report, it’s evident that the infrastructure requisite for scaling AI products will accelerate, positioning Nvidia as an enticing investment avenue.
Strong Revenue Growth
Over the past 12 months, Nvidia has reported sales amounting to $45 billion, a significant jump from $26 billion in fiscal 2023.
Ironically, despite its substantial size, Wall Street foresees the tech giant’s sales climbing to $59.16 billion in fiscal 2024 (ending in January) and further to $94.46 billion in fiscal 2025.
Investors keenly anticipate Nvidia’s upcoming Q4 results, slated for release after the closing bell on Wednesday, Feb. 21.
Benefiting from an asset-light model, Nvidia’s free cash flow has surged to $17 billion over the last four quarters, significantly outstripping rival semiconductor stock Advanced Micro Devices (AMD), which reported free cash flow of $1 billion.
In comparison, forecasts indicate that Nvidia’s adjusted earnings per share could reach $115 by the conclusion of fiscal 2028.
Therefore, should Nvidia stock be valued at 25 times forward earnings, its shares could potentially be valued at $2,875 within the next four years, indicating an upside potential of 300% from current levels.
