Nvidia has achieved a market capitalization that surpasses the combined worth of Amazon and Tesla. This remarkable milestone was reached following a surge in Nvidia’s stock price, which hit new record highs early on Friday (May 24).
Nvidia shares climbed 0.4% in early trading on Friday, reaching an impressive $1,042 per share. This follows a 9.3% increase on Thursday, spurred by the company’s outstanding earnings report. As a result, Nvidia’s market cap has soared to $2.59 trillion, a figure that eclipses Amazon’s $1.88 trillion and Tesla’s $554 billion combined.
Since the beginning of 2024, Nvidia’s stock has risen by 110%, a stark contrast to the more modest gains of 10% in the S&P 500 index and 11% in the Nasdaq Composite Index over the same period.
Nvidia’s exponential growth is largely attributed to its leadership in AI technology and the production of advanced graphics processing units (GPUs). The company’s latest earnings report addressed concerns about potential slowdowns in orders and highlighted robust growth in AI infrastructure investment outside the U.S.
CEO Jensen Huang noted that despite increasing competition in China, Nvidia’s focus on AI and continuous innovation in GPU technology have positioned it at the forefront of the AI revolution. This strategic emphasis is expected to drive further demand for Nvidia’s powerful AI hardware, potentially boosting its market value even higher.
“There are always potential headwinds when you are king of the mountain as everyone will be gunning for you. [Nvidia’s] biggest headwinds come in the form of China invading Taiwan,” said Jay Woods, chief global strategist at Freedom Capital Markets.
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Despite its impressive growth, Nvidia faces several challenges. The company’s reliance on Taiwan Semiconductor Manufacturing (TSMC) for its most advanced chips poses a geopolitical risk, given China’s view of Taiwan as a breakaway province. Nvidia aims to mitigate this risk by sourcing chips from new TSMC facilities under construction in Arizona.
In the Chinese market, Nvidia’s H20 chips are being sold at over a 10% discount compared to Huawei’s rival Ascend 910B chips, highlighting competitive pressures. Nvidia’s future success will depend on navigating these challenges while maintaining its technological edge.
While many Wall Street analysts are bullish on Nvidia, some caution against potential headwinds. Jay Woods, chief global strategist at Freedom Capital Markets, pointed to the geopolitical risks associated with China’s stance on Taiwan as a significant concern.
“Looking beyond to the next 4-6 quarters, we believe a decline in demand for Nvidia compute is inevitable, as model providers shift toward focusing on driving computational efficiency and their largest customers…all develop their own silicon,” Luria wrote in a research note.
Gil Luria, an analyst at D.A. Davidson, remains one of the few without a bullish stance on Nvidia, citing a potential decline in demand for Nvidia computing in the next 4-6 quarters. Luria argues that as model providers focus on computational efficiency, major customers like Google, Amazon, and Microsoft may develop their silicon, reducing their reliance on Nvidia.
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Similarly, DZ Bank analyst Ingo Wermann downgraded Nvidia stock to hold from buy, citing the threat of in-house chip development by major tech companies. He set the stock’s fair value at $1,025, slightly below its current trading price.
Nvidia’s rise has had a ripple effect across the semiconductor industry. Competitors such as Advanced Micro Devices (AMD) and Intel also saw their stocks rise, gaining 1.4% and 1.2% respectively in morning trading.
Nvidia’s success underscores its pivotal role in the technology sector, particularly in AI. The company’s GPUs are widely recognized as the best in the industry for handling AI workloads, making them indispensable for companies and researchers engaged in AI projects.
The surge in Nvidia’s stock has also significantly increased CEO Jensen Huang’s net worth. Reports indicate that Huang’s net worth jumped by $8 billion in a single day, reaching $91 billion.
As AI continues to evolve and expand into various sectors, the demand for powerful AI hardware like Nvidia’s GPUs is expected to grow. This ongoing demand could propel Nvidia’s market value to new heights, solidifying its position as a leader in the tech industry.
