Key points:

  • Nvidia’s market capitalization reached $3.34 trillion, surpassing Microsoft and Apple.
  • The stock’s 3.5% rise on Tuesday was a catalyst for the company.
  • Nvidia shares are up 170% this year and 1,100% since October 2022.

Due to the stunning growth of its shares, Nvidia managed to take first place among the most valuable companies in the world. This event underscores the enormous hopes that investors have for artificial intelligence and its impact on the global economy in the coming years.

Nvidia shares soared 3.5% on Tuesday, giving the company’s market capitalization around $3.34 trillion. Thus, the leader of the semiconductor market has surpassed its main competitors – Microsoft and Apple, which in recent days have been fighting for first place.

Competition against Microsoft and Apple

Nvidia shares have soared 170% this year and are up 1,100% since October 2022, driven by strong demand for its chips, which have become the gold standard in artificial intelligence.

The company’s success has fueled not only its revenue growth, but also a strong response from investors who believe in the potential of AI. In 96 days, Nvidia’s market capitalization rose from $2 trillion to $3 trillion, outpacing its competitors. By comparison, it took Microsoft 945 days and Apple 1,044 days to go from $2 trillion to $3 trillion.

The fate of the former market leaders is ambiguous. Microsoft, which was No. 1 in the late ’90s, suffered a decline in the early 2000s due to the dot-com bubble but then rose again in the second half of the last decade. Exxon Mobil, which dominated the 2000s, lost ground as oil prices fell. Cisco’s story serves as a cautionary tale. In March 2000, at the peak of the dot-com boom, the company’s shares peaked at $80. At the time, investors were generous with their gifts to Internet companies, but this was followed by a sharp decline.

Could Nvidia be overvalued?

Bespoke analysts conducted a comparative analysis of the development trajectories of Nvidia and Cisco. Both companies play important roles in the development of Internet infrastructure. Nvidia has shown phenomenal growth, but it will need to maintain its momentum and outpace its competitors to keep its stock growth rate strong.

Today, Nvidia’s earnings are the main driver of its stock’s growth. In the latest quarter, the company’s revenue more than tripled to $26 billion, and net income jumped sevenfold to $14.9 billion.

LSEG analysts predict that Nvidia’s revenue will double in the current fiscal year to $120 billion and grow another 33% to $160 billion in 2026.

Despite the rise in the share price, Nvidia’s valuation has declined on a number of metrics. For example, the forward price-to-earnings (P/E) ratio is now 43, up from 25 at the start of the year but lower than it has been for most of last year.

It’s worth noting that Nvidia is not alone in its success. Other technology companies such as Super Micro Computer and Arm Holdings also posted strong gains in their shares amid growing optimism about the potential of AI.