Nvidia Corp. (NASDAQ:NVDA) recently made headlines for joining the “elite trillion dollar group” after its market capitalization briefly crossed $1 trillion in the last week of May.
Nvidia is one of the few companies with a 13-figure valuation. Some of the most important include Apple Inc., Amazon.com Inc.parent google Alphabet Inc. And Microsoft Corp. Some of them have even exceeded 2 trillion dollars in recent months.
Nvidia’s rise can be attributed to increased demand for semiconductors during the COVID-19 pandemic, as the job market has adapted to remote working and the recent boom in artificial intelligence (AI) .
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The AI boom
Although experts are divided on whether Nvidia can maintain its dominance in the AI chip market, almost everyone unanimously agrees that AI is the next big thing in technology. ChatGPT, the viral generative artificial intelligence tool downloaded nearly half a million times in the first week of launch, has become the fastest growing consumer app in history. The AI platform hit 100 million active users in the first two months alone, a feat that hasn’t been seen in the “20 years since the internet space”, analysts say. ‘UBS.
Although Nividia’s heavily overvalued stock may make it too expensive for retail investors, investing in AI-powered startups such as Gameflip on popular crowdfunding platforms may be a feasible alternative. While the odds of Nvidia’s stock price crash in the near term are high, as the stock has already begun to pull back, startups leveraging AI technology can tap into the recent AI boom without having to worry about temporary stock market reversals.
The Best Performing Stocks in the S&P 500 Index
Nvidia has been the best performing stock in recent years, successfully capitalizing on the growing demand for microchips and the growing popularity of AI. Up more than 165% year-to-date and nearly 130% in the past year, Nvidia stock is one of the biggest gainers from the pandemic and recent focus on the AI.
Analysts have long been bullish on Nvidia, with CFRA Research analyst Angelo Zino saying, “We view Nvidia as the most important company on the planet in an era that is rapidly moving towards an era that will be accentuated by new greater AI capabilities.”
Nvidia’s powerful AI tool: A100 chips
Nvidia’s flagship graphics processors and AI chips have made it the most valuable company today. Thanks to the growing demand for AI chips used in data centers and generative AI applications created by OpenAI, Google and Microsoft, Nvidia is on the verge of having a “giant banner year”, according to CEO Jensen Huang. The company is beating former industry titans including Intel Corp. and Advanced Micro Devices Inc., which reflect the rapidly changing environment of the technology industry.
Nvidia controls 95% of the market share of graphics processors used for AI and machine learning, with its crown jewel A100 chip priced at around $10,000, according to a New Street Research report. .
Huang credits OpenAI’s ChatGPT with its recent success and fleeting trillion-dollar valuation.
“The flashpoint was generative AI,” he said, “We know that the CPU [central processing unit] scaling slowed down, we know accelerated computing is the way to go, and then the killer app came along.”
Overvaluation concerns and Elon Musk’s warning
It’s no surprise that the shares of the world’s most valuable publicly traded semiconductor maker are overvalued. Nividia stock, which has nearly tripled in the past eight months, currently trades at 49.87 times future earnings under non-generally accepted accounting principles (GAAP). The industry average forward price-to-earnings ratio is 22.33, while Taiwan Semiconductor Manufacturing Co. Ltd., one of the world’s leading semiconductor makers, is trading just above 20 times its long-term profits.
Billionaire polymath Elon Musk, known for his controversial stance on several socio-economic topics and wayward tweets, responded to a tweet stating that Nividia stock had generated the highest returns of any other US stock in recent years. last 10 years.
Musk said Nvidia’s monopoly in the AI chip market will soon come to an end as other semiconductor makers ramp up their innovation and production capabilities.
“Also many other NN’s [neural network] accelerator chips are also under development. Nvidia won’t have a monopoly on large-scale training and inference forever,” the Tesla CEO tweeted on June 7. Nividia stock hit a month-to-date low on June 7 at the following Musk’s tweet.
This article Elon Musk’s Latest Warning to Nvidia originally appeared on Benzinga.com
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