Nvidia Nears Apple's Valuation in Race for Second-Most-Valuable Company

Nvidia is rapidly overtaking Apple to rank as the second most valuable business in the world. This is because investors are attracted to semiconductor manufacturer whose processors power well-known artificial intelligence technologies like ChatGPT.

In only nine months, Nvidia's valuation has risen from $1 trillion to over $2 trillion thanks to an AI-driven, mind-blowing spike in the company's shares, surpassing Amazon.com, Google parent Alphabet, and Saudi Aramco along the way.

At now, Nvidia's market value is around $2.38 trillion, which is less than that of Apple by roughly $230 billion and Microsoft by roughly $645 billion.

This year, Wall Street has reached new highs thanks in large part to Nvidia's unrelenting share price climb. The firm has 80% of the market for high-end AI chips, and its weight on the benchmark S&P 500 index is more than 5%.

The stock of Nvidia, up 95%, and Meta Platforms, up 46.6% so far this year, have beaten the shares of the other companies in the so-called Magnificient 7, demonstrating investors' voracious desire for everything related to artificial intelligence.

Richard Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey, stated that "Nvidia's rally reflects the incredibly strong fundamentals underlying its current business model."

"It also receives strong speculative support as a favorite among long option buyers, who have seen the stock climb almost straight to the upside throughout 2024."

In the meantime, Microsoft took over as the most valuable American corporation in January, surpassing Apple, which is struggling with declining iPhone sales, for the first time since 2021.

Additionally, Nvidia has surpassed Tesla as the most traded company by value on Wall Street in recent weeks.

Despite the stock's impressive run, its 12-month forward price-to-earnings ratio of 36.6 is lower than it was a year ago as analysts increased their profit projections.

The cheapest "AI narrative" stock available is really Nvidia, according to Aptus Capital Advisors portfolio manager David Wagner.

"We believe that in five years or 10 years we will all be talking about an industry that is much bigger than the numbers that are being reported today."

Nvidia's stock appears to be approaching its top, though.

According to LSEG data, Nvidia's median target price for the next 12 months suggests the company will trade at $850 per share, which is less than the recent closing price of $926.

"Of course, as the law of large numbers eventually kicks in, it is very difficult for the price of any mega-cap stock to grow at this pace."

However, if the business can continue to achieve or beyond the high expectations of analysts, the stock price may stay at current levels, according to Cherry Lane's Meckler.