Nvidia is no longer the most valuable company in the world. Here’s what investors need to know.

Competition for the title of world’s most valuable company is heating up. Earlier this week Nvidia (NASDAQ:NVDA)after its monstrous run of recent years, has taken a leap forward Microsoft And Apple to become the largest company in the world by market capitalization (market capitalization), the total value of all of a company’s publicly traded shares.

After dominating its competitors, Nvidia returned to third place, but that’s no reason to worry. It’s a close race and the three will likely trade places for a while. The next set of results later this summer will be a major catalyst that could move the needle to a more stable place if any of the companies beat their own forecasts and Wall Street’s expectations – or fail.

No investment theme is more popular right now than artificial intelligence (AI) and Nvidia is its poster child. Investors are salivating over the incredible returns the company consistently generates quarter after quarter – its revenue last quarter was up 260% year over year – with the promise of continued growth in the future. Its rapid rise since AI came to public attention is one for the record books. But what should investors pay attention to in the long term?

Understand what makes Nvidia special

Nvidia has a unique position in the market. The company was so far ahead that it was able to capture about 80% of the AI ​​chip manufacturing industry.

Of course, like most successful businesses, it was a matter of a little luck and a lot of foresight. CEO Jensen Huang made a bet. Nvidia made chips called graphics processing units (GPUs) that were, for much of the company’s history, accessories to the all-powerful central processing unit (CPU) that made Intel What it was. He saw that the industry was reaching the limits of processor technology evolution and that his company’s GPUs could move into the spotlight.

Turns out he was right. Without going into too much technical detail, if you focus on chips that look a lot like GPUs – like the company’s Grace Blackwell “Superchip” – with CPUs playing a supporting role, you can run power-hungry applications and continue to scale them. And AI is undoubtedly power hungry.

Nvidia doubled down on this technology before it was trendy, so when AI exploded onto the scene, the company was already there, providing its technology to the entire industry. Now, AI servers run by companies like Alphabet, Amazonand Microsoft are powered by Nvidia chips.

It is essential that AI happens – and when –

Nvidia has grown from a relatively specialized computer company, working primarily in the video game industry, to one of the largest companies in the world. Just look at this reversal of fortune from once-dominant processor maker Intel. The chart shows the revenue of both companies over the past 10 years. Last 12 months (TTM) base.

NVDA (TTM) Earnings Chart

It’s a twist of fate. But destiny can be capricious. Nvidia’s future largely depends on whether AI can deliver on its promises. A lot…

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