Nvidia, the AI chip giant, is on the verge of surpassing Apple to become the world’s second-most valuable company. The semiconductor maker, known for its high-end chips, is just $230 billion behind Apple’s market valuation. Nvidia’s stock has soared 95 percent so far this year, fueled by the increasing demand for artificial intelligence.
Nvidia’s market valuation increased to $2 trillion recently, up from $1 trillion in just nine months, overtaking Amazon, Google parent Alphabet Inc., and Saudi Aramco. At the end of 2022, Nvidia was worth $359 billion. Less than a year and a half later, it could be worth $3 trillion, surpassing Microsoft and Apple in market cap. If the stock continues to rise at its current rate, Nvidia is on track to achieve this feat by the end of the year.
However, no growth stock goes up in a near-straight line forever. It remains to be seen what it would take for Nvidia to slow down, and even if it does, why it could still take pole position as the most valuable company in the world. Despite the challenges, Nvidia checks all the boxes that growth investors look for. When the story is that good, the only thing preventing a stock from soaring is the valuation.
Nvidia is converting nearly $0.50 on every dollar in sales into net income, an incredible achievement, especially at the scale at which Nvidia is doing it. Nvidia also has extremely high operating margins, higher than any other “Magnificent Seven” company, a term that refers to large, industry-leading growth stocks Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta Platforms, and Tesla.
To top it all off, Nvidia has a net cash position on its balance sheet. In fact, it makes money on its cash, generating over $600 million in interest income over the last 12 months. With these strong fundamentals, Nvidia’s rally is more supported than one might realize.
Read more: gizmodo.com