This article is published in collaboration with Statista
by Felix Richter
Ever since Nvidia revealed how much (and how soon) it expects to profit from the AI hype, the chipmaker has been riding a wave of investor euphoria. Having gained more than $300 billion in market cap since May 24, the company officially joined the exclusive trillion-dollar market cap club this week, when its share price closed at $410.22 on Tuesday, raising its market capitalization to $1,013 billion. That’s up almost 200 percent from just over $350 billion at the beginning of the year, when the sentiment surrounding Nvidia was everything but euphoric.
Now before you hop aboard the Nvidia hype train, it’s important to note that the stock is currently traded at a forward price-to-earnings multiple of more than 50, which is significantly higher than other mega-cap stocks. That means a good deal of AI-related growth, which has yet to materialize, is already priced into the stock, limiting the potential for further upside. There is a significant downside risk, however, as some analysts consider Nvidia grossly overvalued, arguing that investors got carried away with the AI hype.
Nvidia isn’t the only member of the trillion-dollar club to reach new highs these days, as Apple and Microsoft, a fellow beneficiary of the AI boom, closed at new all-time highs on Thursday. Both companies are flirting with a $3-trillion valuation, which would have been unthinkable just a couple of years ago.
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