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Tech Shuffle: Nvidia Now More Valuable Than Apple on Wall Street

By:
Carolane De Palmas
Published: Jun 10, 2024, 08:54 GMT+00:00

Fueled by the booming demand for artificial intelligence (AI), chipmaker Nvidia surged past Apple yesterday, Wednesday, June 5th, to become the second-most valuable U.S. company.

Nvidia Chip, FX Empire

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Nvidia‘s stock price went up over 5%, exceeding $1,224 per share. This surge propelled the company’s market capitalization above $3 trillion, eclipsing Apple’s market cap and securing Nvidia the coveted second-place position behind Microsoft.

This milestone marks a significant shift in the tech landscape, potentially signalling a new era where AI innovation reigns supreme. Apple, which has dominated Silicon Valley since the launch of the first iPhone in 2007, now finds itself surpassed by a company at the forefront of the AI revolution.

Daily Chart of Nvidia – Source: ActivTrader

Nvidia’s surge past Apple as the second-most valuable U.S. company reflects investor confidence in its role as a key player in the booming artificial intelligence industry. While Nvidia capitalises on the “AI hype” by providing the hardware for this revolution, established tech giants like Microsoft, Apple, Amazon, Google, and Meta Platforms are all heavily invested in developing their own AI applications.

But could Nvidia’s dominance in the AI hardware space eventually propel it to surpass Microsoft and become the world’s most valuable company?

Nvidia’s past stock price performance certainly supports the possibility. The company has witnessed a staggering 150% year-to-date increase in 2024, a 205% rise over the past year, and a mind-blowing 3,315% growth in the last five years. These figures paint a picture of a company experiencing explosive growth.

However, overtaking Microsoft would require Nvidia to not only maintain its current trajectory but also potentially transition beyond hardware and establish itself as a major player in AI software and applications. This would involve competing directly with companies like Microsoft that are already heavily invested in this area.

It will be fascinating to see how this story unfolds. Nvidia’s current success is undeniable, but whether it can dethrone Microsoft will depend on its ability to capitalise on its AI leadership and potentially expand its reach into the software realm.

Source: LSEG, Reuters

Nvidia Powers Through: Impressive Financial Results Continue in 2024

On May 22nd, 2024, Nvidia delivered a resounding blow-out quarter, exceeding Wall Street’s expectations by a wide margin. This stellar performance further solidifies the US company’s position as a dominant force in the advanced chip market and a key player in the burgeoning era of artificial intelligence.

Supported by surging demand, Nvidia reported a staggering 262% year-on-year increase in revenue for Q1 2024, reaching a record high of $26 billion. This impressive growth wasn’t limited to just sales figures. Profits also skyrocketed, with earnings per diluted share jumping 462% to $5.98, marking a remarkable 600% increase compared to the same period in 2023.

The driving force behind Nvidia’s exceptional performance can be attributed in large part to the booming data centre segment. This sector witnessed record quarterly sales of $22.6 billion, reflecting a significant 23% growth over the previous quarter and a phenomenal 427% increase compared to Q1 2023. This surge in demand underscores Nvidia’s critical role in powering the ever-growing data processing needs of the digital age.

In a move to attract income-seeking investors and reward existing shareholders, Nvidia announced a significant increase in its quarterly dividend. The company decided to distribute $0.10 per share, representing a substantial 150% jump from the previous rate of $0.04 per share.

Nvidia’s Q1 results paint a picture of a company firing on all cylinders. The company’s leadership in advanced chip technology, coupled with the continued growth of the AI and data centre markets, positions Nvidia for continued success in the foreseeable future, which pushes investors to bet on Nvidia.

Wall Street Increasingly Bets on Nvidia as an Inflation-Proof Investment

A May 2023 Bloomberg Markets Live Pulse survey has unearthed a significant shift in how investors view inflation hedges. Traditionally, gold has held the top spot as a safe haven asset, offering protection against rising prices. However, the survey results suggest a potential challenger emerging – technology stocks, particularly those of chipmaker giant Nvidia.

While nearly half (46%) of respondents still favour gold as an inflation hedge, a noteworthy minority (33%) now view large technology companies as a more effective shield against inflation. This trend reflects a multifaceted transformation in the financial landscape.

The growing influence of US tech giants like Nvidia, Amazon, and Meta Platforms plays a crucial role in this shift. These companies have consistently delivered strong financial performances, generating significant profits and demonstrating their ability to adapt and thrive in a dynamic economic environment.

This consistent profitability breeds investor confidence. Investors believe these companies can not only weather inflation but also continue to experience sustained growth, leading to potential stock price appreciation that outpaces inflation.

Tomorrow’s 10-For-1 Stock Split Will Make Nvidia’s Share More Affordable

Following in the footsteps of tech titans like Alphabet, Amazon, and Tesla in 2022, Nvidia is set for a new 10-for-1 stock split on June 7th, 2023, after its share price has been strongly on the rise.

A 10-for-1 stock split is a corporate action that increases the number of a company’s outstanding shares while proportionally decreasing the price per share. To make it easier to understand, let’s imagine that the Nvidia share price was $1,000 before the stock split.

The price of each individual share after the stock split will decrease by a factor of 10, so it will become roughly $100 per share after the split. The total value of your holdings will remain the same. If you owned 1 share worth $1,000 before, you’ll now own 10 shares each worth $100, for a total value of $1,000. The stock split itself doesn’t change the company’s underlying value or financial performance.

While historical performance shouldn’t guarantee future outcomes, stock splits often make shares more accessible to individual investors, which can lead to several potential benefits.

Lower share prices can attract new investors who may have previously found the stock too expensive. This broader investor base can increase trading activity, potentially driving the share price higher. Stock splits don’t change a company’s underlying value, but by making individual shares more affordable, they potentially make them a more attractive buy for investors with limited capital.

Ultimately, the success of the stock split depends on a variety of factors beyond just the split itself. However, it’s a strategic move that could entice new investors and reassure existing ones, potentially fueling Nvidia’s continued growth.

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About the Author

Carolane graduated with a Masters in Corporate Finance & Financial Markets and got the AMF Certification (Financial Markets Regulator in France). Afterward, she became an independent trader, investing mostly in European and American stocks/indices.

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