- Nvidia’s exceptional market performance driven by AI dominance raises its position in the tech industry.
- Some financial analysts expressed their concerns over Nvidia’s reaching a market peak and the high expectations from analysts.
- The company’s ability to sustain growth amidst intense competition remains crucial concentration.
OUR TAKE：
The extraordinary surge in Nvidia’s market value due to its dominance in AI chips reflects the growing importance of AI in the tech industry. However, concerns about reaching a peak and maintaining high expectations loom. Despite being relatively “cheap” compared to other AI-focused stocks, sustaining this rapid growth will challenge Nvidia.
— Iris Deng, BTW reporter
Nvidia’s market value surged surged to the second company in the tech industry, closely following Apple. AI dominance made Nvidia concurred AI chip market while attracting more investors.
Nvidia’s market value surged to the second closely followed Apple
Nvidia, by far the largest AI chipmaker, its market capitalization currently hovers around $2.38 trillion, lagging Apple by just $230 billion and Microsoft by about $645 billion. Meanwhile, the rally in Nvidia shares has increased more than $1 trillion. It reached this jaw-dropping achievement in just 9 months.
Nvidia has been controlling 80% of the high-end AI chip market, and its consistent rise in shares pushed Wall Street to record levels this year while giving the company a more than 5% weightage on the benchmark S&P 500 index.
“Nvidia’s rally reflects the incredibly strong fundamentals underlying its current business model,” said Richard Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
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The investors favoured Nvidia for it chips power of popular artificial intelligence tools
in recent years, Nvidia ramped up its investment in startups that delve deeper into the AI space. According to S&P Global and Crunchbase, the funding and investment database, Nvidia’s startup investments jumped 280% year-over-year from 2022 to 2023, with the company and its VC arm, Nvidia Ventures, participating in ~46 deals last year, highlighting investors’ insatiable appetite for everything AI.
“It is also finding strong speculative support as a favorite among long option buyers who have seen almost a straight upward climb throughout 2024.”
Nvidia should focus on sustaining growth while reaching a market peak
With its surging market value, Nvidia also replaced Tesla as Wall Street’s most-traded stock by value in recent weeks. Analysing to David Wagner, portfolio manager at Aptus Capital Advisors, “ Nvidia is in fact the cheapest of the “AI narrative” stocks out there.”
However, there are marks that Nvidia stock is reaching a peak.
Over the next 12 months, Wall Street analysts’ median target price implies Nvidia would trade at $850 per share, below the last closing price of $926, LSEG data showed.
“Of course, it is very difficult for any mega-cap stock’s price to continue to grow at this pace as the law of large numbers eventually comes into play. But the stock price could remain at these levels if the company can continue to meet or exceed the high expectations of analysts,” Cherry Lane’s Meckler said.
