Lewis Krauskopf
NEW YORK (Reuters) – Nvidia (NASDAQ:) has become the world’s most valuable company following a stunning rise in its shares, underscoring the huge role investors expect artificial intelligence to play in the global economy in the coming years.
Nvidia shares rose about 3% on Tuesday, giving it a market value of about $3.33 trillion. This allowed the semiconductor market leader to leapfrog Microsoft (NASDAQ:) and Apple (NASDAQ:), which have been battling for first place in recent days.
Nvidia’s rise in market value has been fueled by demand for its chips, which are the gold standard in artificial intelligence. The company’s shares are up more than 170% this year and are up about 1,100% from their October 2022 low.
Blockbuster earnings and growing investor enthusiasm for artificial intelligence are accelerating Nvidia’s rally. This enthusiasm was reflected in Nvidia’s market value, which took just 96 days to rise from $2 trillion to $3 trillion.
Microsoft, one of only two other companies to reach this rare milestone, took 945 days to rise from $2 trillion to $3 trillion, while Apple took 1,044 days to make the leap, according to Bespoke Investment Group.
According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, only 11 U.S. companies have achieved the No. 1 closing market value since 1925.
The fates of former holders of top positions have diverged in recent decades. Microsoft reached number one in the late 1990s, but then its stock struggled in the early 2000s due to the dot-com bubble, only to rise sharply again in the second half of the last decade.
Exxon Mobil (NYSE:) became the world’s most valuable company in the 2000s, but its shares fell after falling oil prices.
For some, Cisco (NASDAQ:) is a cautionary tale. The company’s shares peaked at more than $80 in March 2000, at the height of the dot-com boom, during which investors often assigned staggering valuations to Internet-related companies.
Bespoke analysts recently compared the growth trajectories of Nvidia and Cisco, whose products were seen as important to supporting the Internet’s infrastructure.
“NVDA’s performance has been incredible, but it will have to continue to grow and fend off competition if its stock continues to deliver stellar returns,” Bespoke said in a recent note.
For now, Nvidia’s earnings are supporting its stock price. In the latest quarter, revenue more than tripled to $26 billion and net income jumped sevenfold to $14.9 billion.
Revenue in the current fiscal year is expected to roughly double to $120 billion, before rising another 33% in fiscal 2026 to $160 billion, according to LSEG.
Nvidia’s impressive financial results and outlook have caused its stock valuation to decline by some measures, even as its share price has risen. For example, according to LSEG Datastream, Nvidia’s forward price-to-earnings ratio was last at 43. That’s up from the 25 level it was at at the start of the year, but below the level it reached for much of last year. In contrast, it trades at 21 times earnings.
While Nvidia has delivered outstanding results, it’s not the only company to benefit from enthusiasm about the potential profits from artificial intelligence. Shares of other technology companies, including Super Micro Computer (NASDAQ:) and Hand (NASDAQ:) assets have also risen sharply this year.