Nvidia overtook Microsoft as the company with the highest market capitalization in the world. Some analysts, however, fear it may be overvalued.
Following the round of trading on Monday, Nvidia is now the world’s most-valued company with a total market capitalization of $3.4 trillion. That’s larger in nominal terms than the entire economy of the United Kingdom, the world’s sixth-richest nation.
Immediately after the bell rang on Tuesday, Nvidia shares experienced an additional 1.37% boost. One Nvidia stock is traded at $124.24 as of mid-Tuesday.
Earlier this month, Nvidia passed Apple as the second most-valued firm in the world. On Monday, Nvidia overtook Microsoft as the world’s highest-evaluated company.
Nvidia’s stock price rose almost 165% year-to-date against an overall 15.55% increase for the S&P 500. In 5 years, Nvidia’s stock price increased by 2,967%.
On the other hand, Apple’s and Microsoft’s stock prices increased by 18.73% and 22.5% respectively in 2024. Apple was the world’s most-valued company at the beginning of the year but was passed by Microsoft in January.
According to some analysts, Nvidia’s rally is far from over. The company’s market capitalization could break the $5 trillion mark, bigger than the economy of Germany, the world’s third-richest country. Specifically, Rosenblatt Securities analyst Hans Mosesmann increased his target price for the microchip maker to $400 per stock.
The reason for Nvidia’s outstanding rally
Analysts and experts all agree that one main reason for Nvidia’s skyrocketing rise to the top is its first-mover advantage in AI chips. The design of Nvidia’s semiconductors is simply unmatched by any other AI chip. Any tech giant that operates in the artificial intelligence sector, from OpenAI to Meta, from Alphabet to
This monopoly also allows Nvidia to charge unthinkable prices for its products. Although not publicly disclosed, internal sources said one top-tier AI chip made by Nvidia retails at roughly $30,000.
With that, Nvidia’s quarterlies have exceeded every market expectation several times in a row. In its latest earnings report in April, Nvidia reported a 262% year-on-year jump in revenues to $26 billion and a 628% annual increase in net income to $14.88 billion.
Despite these outstanding numbers, some analysts fear this bubble will burst when artificial intelligence technology will stabilise. Indeed, although the annual increase is definitely noteworthy, Nvidia’s numbers are but a fraction of Apple’s and Microsoft’s.
By comparison, Apple reported $90.75 billion in revenues and $23.64 billion in earnings last quarter. Microsoft posted $61.86 billion in revenues and $21.94 billion in net income.
By this measure, Nvidia’s stock is certainly overvalued. That is unless it keeps the same annual growth for the following years. And unless competition doesn’t catch up.
