Will artificial intelligence (AI) allow Nvidia to crush Apple and Microsoft and become the most valuable “Big Seven” stock?

Nvidia (Nasdaq: NVDA) It has become the hottest player in the field of artificial intelligence (AI), and its cutting-edge graphics processing units (GPUs) are the most important hardware component of servers running advanced artificial intelligence applications.

Nvidia currently holds about 90% of the market in the particularly high-margin category of GPUs customized for running artificial intelligence and other accelerated computing applications. Advanced Micro Devices and Intelis taking steps to bolster its capabilities in the ultra-high-performance GPU space, a category where many analysts expect Nvidia to maintain its incredible strength.

Riding on incredible performance and management’s guidance for further explosive growth, Nvidia shares are up 240% in the last year and are up 82% so far in 2024.

Those gains pushed Nvidia’s market value to about $2.27 trillion. It is now the third most valuable company in the world and the third largest member of the Most Valuable Companies group.Hao Qi”. appleIt currently ranks second with a market capitalization of US$2.65 trillion, while Microsoft, which ranks first, has a valuation of approximately US$3.12 trillion.

Could Nvidia soon become the world’s most valuable company?

Artificial Intelligence’s most influential players are reaping the rewards

Starting from the end of 2022, artificial intelligence technology will begin to make incredible leaps at a rapid pace. This progress is accelerating dramatically in 2023 and shows no signs of slowing down this year.

As businesses and institutions take action to gain access to greater opportunities artificial intelligence spaceAs demand for Nvidia’s most advanced processors surges, its sales and profits soar.

In the fourth quarter of last year, the company’s sales increased by 265% year-on-year to US$22.16 billion; thanks to a significant acceleration in performance in the second half of 2023, Nvidia’s full-year sales increased by 126% to US$60.9 billion.

NVDA Net Profit (TTM) Chart

NVDA Net Profit (TTM) Chart

Nvidia reported a net profit of $29.76 billion last year, equivalent to 49% of its total sales. That’s an incredible net margin for a hardware-oriented business, which tends to have lower margins due to higher incremental costs compared to software-oriented businesses. Relevant to the production of physical goods.

But the company’s incredible profit margins reflect how in-demand its GPUs are right now. It’s reasonable to expect Nvidia’s incredible growth to slow down, but the business looks poised to grow much faster than Apple and Microsoft in the coming years. At least.

AAPL Net Profit (TTM) ChartAAPL Net Profit (TTM) Chart

AAPL Net Profit (TTM) Chart

Apple and Microsoft’s revenue and net profit still far exceed Nvidia’s. On the other hand, the chip giant looks well positioned to continue to be the biggest winner in the artificial intelligence revolution and grow much faster than its larger companies. Tech giant.

By comparison, Microsoft’s sales grew about 10% over the past 12 months, and net income rose 20%. Meanwhile, Apple’s revenue has been essentially flat over the past 12 months, even as its net income rose 7%.

If demand for artificial intelligence services continues to grow significantly, Nvidia is likely to surpass Apple’s market capitalization within the next five years and take away the title of the world’s most valuable company from Microsoft. While the GPU leader’s business has historically been affected by cyclical trends, it appears to be in the early stages of benefiting from the unfolding artificial intelligence revolution.

Currently, Nvidia is benefiting from the emergence of an unprecedented new technology, which means predicting its performance over the next five years involves a lot of guesswork. But given its incredible sales and earnings momentum and the overall market excitement for artificial intelligence, it wouldn’t be surprising if Nvidia takes the title of the world’s most valuable company.

Should you invest $1,000 in Nvidia right now?

Before buying Nvidia stock, consider the following factors:

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Keith Noonan There are no positions in any stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Apple, Microsoft and Nvidia. The Motley Fool recommends Intel and recommends the following options: Long January 2023 Intel calls, long January $57.50 calls, long January 2025 $45 Intel calls, long January 2026 $395 Microsoft calls, short 2026 A $405 call option on Microsoft in January, and a short call option on Intel at $47 in May 2024. disclosure policy.

Will artificial intelligence (AI) allow Nvidia to crush Apple and Microsoft and become the most valuable “Big Seven” stock? Originally published by The Motley Fool

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