AI Darling Nvidia Is Now Worth More Than Alphabet, Amazon

Nvidia's value has now surpassed big players like Amazon and Alphabet. Nvidia's stock price has skyrocketed in the last 15 months, thanks to investors recognizing its strong position in artificial intelligence technology. This happened because there is a high demand for semiconductors, which are like the brains of advanced artificial intelligence technology. Nvidia's shares have seen remarkable growth since 2023, driven by the AI hype gripping Wall Street.

This surge in interest, particularly in Big Tech stocks, propelled a bull market despite high-interest rates, resulting in a 24% increase in the S&P 500 index last year. Nvidia has particularly flourished amid the AI frenzy, experiencing a 49% increase in its stock value this year, following a staggering 239% surge in 2023. After exceeding Amazon's market valuation earlier this week, Nvidia’s market capitalization rose to $1.83 trillion on Wednesday and surpassed Alphabet, per CNN Business. Shares of the Santa Clara-based chipmaker rose 2.5% to $739 a share, while Alphabet shares ended the session at $145.94.

Nvidia's Growth Story

Nvidia stands out as the leading producer of semiconductor chip technology that drives generative AI, which is artificial intelligence capable of creating new content. Investors are not only impressed by Nvidia's potential to benefit from the increasing interest and corporate investment in AI but also by its already remarkable performance.

In the last quarter, Nvidia's earnings before interest, taxes, depreciation, and amortization (EBITDA) soared by over 500% compared to the same period last year, largely due to the exceptional growth in its AI division. This growth far outpaced the solid 20% or more earnings growth seen by Amazon and Alphabet during the same timeframe.

While Nvidia's gross revenue and profits may not be as staggering as those of trillion-dollar companies like Apple and Microsoft, with Nvidia making $9.2 billion in profit last quarter compared to over $22 billion for Apple and Microsoft, analysts anticipate that Nvidia's financials will soon catch up. Despite already experiencing a more than 50% increase in its stock price this year, Nvidia remains one of the most favored stocks on Wall Street. Both Goldman Sachs and Bank of America have set a $800 price target for Nvidia, indicating an additional 8% potential upside for the stock.

Nvidia's stock has seen an astonishing increase of 17,000% in the past decade, making it the top-performing stock on the S&P 500 index. If you had invested $1,000 in Nvidia 10 years ago, it would now be worth around $175,000. This remarkable growth far exceeds that of its closest competitor, Advanced Micro Devices, whose value almost tripled over the same period.

Nvidia surpasses Amazon

Nvidia closed the day with its shares priced at $721.28, resulting in a market value of $1.78 trillion, narrowly surpassing Amazon's market cap of $1.75 trillion. While Nvidia briefly exceeded Amazon's value on Monday (Feb 12, 2024) as well, this marks the first time since 2002 that Nvidia has ended the day with a higher worth.

Shift in product focus

In 2002, Nvidia primarily focused on manufacturing graphics cards for gaming PCs. However, in the past year, Nvidia's shares have surged by over 246%, driven by the high demand for its server AI chips, each priced at over $20,000. Companies such as Microsoft, OpenAI, and Meta require tens of thousands of these chips to operate products like ChatGPT and Copilot.

Amazon's performance

Despite laying off 27,000 employees, Amazon continues to perform strongly. The company reported better-than-expected quarterly earnings on February 1, 2024, leading to a 78% increase in its shares over the past year. The ongoing competition between Nvidia and Amazon underscores the dynamic nature of the world's most valuable companies.

Earnings announcement

Nvidia is scheduled to report its earnings for the fiscal quarter ending last month on February 21, with analysts forecasting a remarkable 118% annual growth in sales, projecting revenues to reach $59.04 billion, per Money Report.