Nvidia (NVDA.O) has become the world’s most valuable company, surpassing Microsoft and Apple, with a market value of about $3.34 trillion. This remarkable increase in market value is due to the high demand for Nvidia’s chips, which are considered the best in the AI space. The company’s shares have risen by over 170% this year and by about 1,100% since October 2022.
Nvidia’s strong financial performance is reflected in its blockbuster earnings. Its revenue more than tripled to $26 billion in the latest quarter, with net income jumping seven-fold to $14.9 billion. Revenue for the current fiscal year is expected to double to $120 billion, and then rise by 33% in fiscal 2026, reaching $160 billion, according to LSEG data. Despite the surge in its share price, Nvidia’s stock valuation, by some measures, has remained moderate.
For example, Nvidia’s forward price-to-earnings ratio last stood at 43 according to LSEG Datastream. This is higher than the 25 level at the beginning of the year but lower than the levels reached for much of last year. In comparison, the S&P 500 trades at 21 times earnings.
However, the analysts have cautioned that Nvidia will need to keep growing and stave off competition to sustain its stock’s stellar returns. The success of Nvidia has also been reflected in the rise of shares of other technology companies benefiting from enthusiasm about the profit potential for AI, including Super Micro Computer (SMCI.O) and Arm Holdings