Nvidia’s share price reached a record high on Tuesday, propelling it to become the world’s most valuable company. The stock closed at nearly $136, marking a 3.5% increase, surpassing Microsoft’s market value. Earlier this month, Nvidia had also overtaken Apple in terms of valuation.
Nvidia specializes in manufacturing computer chips essential for artificial intelligence (AI) software, and the growing demand for its products has significantly contributed to its sales and profits in recent years. Many investors believe that the company’s earnings have the potential for further growth, which has driven its share price to soar. However, there are some concerns regarding its exceptionally high valuation.
Following Tuesday’s surge in share price, the market now values Nvidia at an impressive $3.34tn (£2.63tn), almost doubling its value since the beginning of this year. Comparatively, just eight years ago, the stock was worth less than 1% of its current price.
The competition among AI developers is intense, with tech giants such as Microsoft, Google-owner Alphabet, Meta, and Apple vying to create groundbreaking products in this field.
Nvidia is the dominant player in the AI chip market, which positions the company to benefit from the ongoing competition. This has led investors to believe that Nvidia’s value will continue to rise. In recent years, Nvidia has consistently surpassed analyst expectations in terms of sales and profits. In fact, after the release of its latest financial results in May, Quilter Cheviot technology analyst Ben Barringer noted that the company had once again exceeded high expectations. He also highlighted that the demand for Nvidia’s products shows no signs of slowing down. However, there is a minority of investors who are more cautious. In February, Barclays credit analyst Sandeep Gupta expressed concerns about Nvidia’s ability to maintain its large market share in the face of increasing competition. He also questioned how Nvidia’s customers would be able to monetize AI software.