The chipmaker NVIDIA passed Alphabet and Amazon in terms of market capitalization. Many are wondering how long this rally will last.
On Monday, NVIDIA closed the market day with higher capitalization than Alphabet (Google’s parent company) and Amazon. The company reached $1.83 trillion in market capitalization, passing Alphabet’s $1.82 trillion and Amazon’s $1.8 trillion. Many analysts are now wondering how long this astonishing rally will last.
When markets opened back on Tuesday, NVIDIA’s levels were corrected to $1.78 trillion, below its “Magnificent” peers. Still, NVIDIA’s rise in the last 13 months was unprecedented in the company’s history, gaining $600 billion in 2024 alone. As of February, the company’s stocks are traded at a whopping $722.
NVIDIA’s rise is mainly linked to its AI chips. The H100 and A100 chips are the highest computing products for regular AI processes, including the Large Language Models (LLMs) that power the likes of ChatGPT, Bard, and other software.
According to some estimates, NVIDIA occupies 80% of the AI chip market. Thanks to its computing products for artificial intelligence, it left competing companies like Qualcomm, Intel, and Marvell Technologies in the dust.
On Wednesday, NVIDIA will post its quarterly earnings, with markets widely expecting it to break profit records for the third time in a row.
How long will NVIDIA’s rally last?
Because of the stock’s 17,000% gain in the last ten years, many are worried NVIDIA’s rally could explode into a bubble sooner or later. In general, AI is driving the S&P 500 beyond record highs, at a time when global uncertainties mount.
According to the Discounted Cash Flow (DCF) model, NVIDIA’s intrinsic value is $253.44, which would make its stock severely overvalued.
Moreover, other competitors in the AI sphere are starting to confront NVIDIA’s dominance. AI pioneer Sam Altman is reportedly seeking trillions of dollars in funds to create its own AI chip company. Whether or not he succeeds, it’s clear that AI developers are feeling threatened by NVIDIA’s market cap.
Nevertheless, NVIDIA is still the favorite stock of many US banks. Goldman Sachs and Bank of America both place $800 as their target price, meaning another 8% rise could still be in the cards.
The chipmaker is still struggling to close the gross revenue gap with other big tech firms. Last quarter, Apple and Microsoft grossed $22 billion in revenues, compared to $9.5 billion by NVIDIA.
The company’s CEO Jensen Huang already said focusing on profits will be their goal for 2024. A new slate of chips and consolidation of the current market position will be their main strategies in the coming months.
