Just a decade after being valued at less than 2% of Apple, artificial intelligence sweetheart Nvidia is within striking distance of surpassing the iPhone maker as the world’s second-most valuable company, and even Microsoft as the largest company on earth, a remarkable rise for a chip designer with a small consumer-facing footprint.
Nvidia has transformed from an $11 billion company to almost a $3 trillion one in less than a decade.
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Key Takeaways
- Nvidia’s market capitalization of $2.8 trillion is just 3% shy of Apple’s $2.9 trillion valuation and 11% shy of Microsoft’s $3.2 trillion.
- That’s a stunning turn from the end of 2014, when the market valued Nvidia at just $11 billion, Apple at $643 billion and Microsoft at $382 billion.
- Having already surpassed other more established technology titans Google and Amazon earlier this year in market cap amid its 130% year-to-date stock rally, Nvidia would need just another $35 increase in its share price to surpass Apple by total value and a $140-per-share rally to surpass Microsoft.
- If recent performance is any indication, that’s a doable feat, as Nvidia’s share price has increased by $70 or more in two of the last four trading days alone.
- There are plenty of believers on Wall Street who think Nvidia can surge past a $3 trillion valuation, with about a third of analyst price targets tracked by FactSet above the $1,220 per share Nvidia stock needs to become the third-ever company to ever crack that $3 trillion threshold.
What To Watch For
If Nvidia stock were to perform anything close to its recent market-leading returns in the future, it would become by far the most valuable company in the world—a perhaps foolish bet considering though the most bullish mainstream analysts only forecast 23% upside for Nvidia’s stock over the next 12 months, though it’s a fun thought exercise.
If Nvidia stock were to match its 195% return over the last 12 months from now through May 2025, it would achieve a market cap of $8.4 trillion, a valuation equivalent to the combined market values of Apple, Microsoft and Google.
Why Is Nvidia Stock Up So Much?
Nvidia is the biggest player in the hottest market on the planet right now, designing an estimated 80% of the semiconductor chips powering generative AI technology, according to Goldman Sachs research. That gives Nvidia immense future earnings potential, especially considering its immense pricing power in dangling its technology to its chip-hungry customers like Apple and Microsoft.
The early impact of the AI revolution on Nvidia’s bottom line is apparent, as its $54 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) over its four most recent quarters is six times higher than its $10 billion EBITDA for 12-month period ending in April 2023.
Meanwhile, Apple has dealt with stalling profit growth, with its free cash flow down by 20% in its most recent quarter. More colorfully, if you’re to believe we’re in the early stages of a “new industrial revolution” thanks to AI, as Nvidia’s CEO Jensen Huang analogised on his company’s earnings call last week, investing in Nvidia is akin to investing in a company who built crucial components in nearly all steam engines in the 1700s. “We are at the beginning stages of what we refer to as the Mother of All Cycles,” according to Rosenblatt analyst Hans Mosesmann, who has had a $1,400 price target for Nvidia since February, when its stock traded at below $800.
Surprising Fact
This week, Huang became one of just 16 people in the world to own a fortune of over $100 billion, according to Forbes’ calculations. It’s a remarkable rise for Huang, a majority of whom’s net worth is tied to his 3.7% stake in Nvidia, considering he was worth just $1.7 billion as of Forbes’ 2016 ranking of the 400 richest Americans.
