Nvidia became the world's most valuable company on Tuesday, dethroning tech heavyweight Microsoft as its high-end processors play a central role in a battle to dominate artificial intelligence technology.
Shares of the chipmaker rose 3.5 percent to $135.58, pushing its market capitalization to $3.335 trillion (roughly Rs. 2,78,15,901 crore), days after the maker of 'iPhone Apple to become the second most valuable company.
Microsoft's stock market value was $3.317 trillion as its shares fell 0.45 percent.
Apple shares fell more than 1 percent, leaving their value at $3.286 trillion.
Nvidia's stunning rise in market value over the past year has become emblematic of a frenzy on Wall Street fueled by optimism about emerging AI technology.
While Nvidia's rally has lifted the S&P 500 and the Nasdaq to record highs, some investors fear that wild optimism about AI will evaporate if there are signs of a slowdown in tech spending.
“It's Nvidia's market; we're all trading in it,” said Steve Sosnick, chief market strategist at Interactive Brokers.
Nvidia has also become by far the most-traded company on Wall Street, averaging $50 billion in daily turnover recently, compared with about $10 billion each for Apple, Microsoft and Tesla , according to LSEG data. The chipmaker now accounts for about 16 percent of all companies in the S&P 500.
Nvidia shares have nearly tripled so far this year, compared with a 19 percent rise in Microsoft shares, with demand for its top-of-the-line processors outstripping supply.
Tech giants Microsoft, Meta Platforms and Google owner Alphabet are competing to develop their AI computing capabilities and add the technology to their products and services.
The insatiable appetite for Nvidia's AI processors, seen as far superior to competitors' offerings, has left them in tight supply, with many investors seeing Nvidia as the biggest winner so far from the surge in AI development .
“Nvidia has received a lot of positive attention and done a lot of things very right, but a small misstep is likely to cause a major correction in the stock and investors should be careful,” said Oliver Pursche, senior vice president. at Wealthspire Advisors in New York.
Tuesday's gain lifted Nvidia shares to a record high and added more than $110 billion to its market capitalization, equivalent to the entire value of Lockheed Martin.
The company's market value expanded from $1 trillion to $2 trillion in just nine months in February, while it took just over three months to reach $3 trillion in June.
Since its breakout forecast about a year ago, the company has consistently beaten Wall Street's lofty revenue and profit expectations, with demand for its graphics processors far outstripping supply as companies they rush to incorporate AI applications.
Nvidia executives said in May that demand for its Blackwell AI chips could outstrip supply “well into next year.”
Sharp increases in analyst expectations for Nvidia's future earnings have outweighed its stellar stock gains, leading to a decline in the stock's earnings valuation.
Nvidia recently traded at 44 times expected earnings, down from more than 84 about a year ago, LSEG data showed.
Increasing the appeal of its highly valued stock among individual investors, Nvidia last week split its shares 10 for one.
© Thomson Reuters 2024
