NVIDIA's Market Cap Surges 800% in Four Years, Nears 4 Trillion Dollars

NVIDIA's stock price closed at a historic high on July 3, with a market capitalization of 3.89 trillion dollars, just shy of Apple's record high market capitalization of 3.915 trillion dollars set at the end of 2024. With a 3% increase in stock price to 163.93 dollars per share, NVIDIA's market capitalization would surpass 4 trillion dollars. This surge is driven by NVIDIA's continued efforts in the AI sector, which has propelled its market capitalization to new heights. This achievement marks a significant milestone for NVIDIA, as it has surpassed Microsoft's market capitalization of 3.86 trillion dollars by approximately 4.3% by the end of June. However, it has not yet broken through Apple's historic high of approximately 3.92 trillion dollars set in December 2024. The optimism surrounding the AI wave on Wall Street has further fueled NVIDIA's stock price, bringing it closer to potentially becoming the company with the highest market capitalization in history.

NVIDIA's market capitalization has grown nearly eightfold in the past four years, from approximately 500 billion dollars in 2021 to its current level. This growth has positioned NVIDIA as a dominant player in the tech industry, with a market capitalization that now exceeds the combined market capitalization of Canada and Mexico's stock markets. Additionally, NVIDIA's market capitalization has surpassed the total market capitalization of all listed companies in the United Kingdom. The company's recent trading price is approximately 32 times the expected earnings for the next 12 months, which is lower than the average forward price-to-earnings ratio of approximately 41 times over the past five years. This relatively moderate price-to-earnings ratio reflects that the steady increase in earnings expectations has gradually outpaced NVIDIA's significant stock price gains.

Despite the optimism surrounding NVIDIA's growth, some market observers remain skeptical about the AI hype. One prominent Wall Street bear has compared the ecosystem surrounding the AI boom to the dot-com bubble. This skepticism is based on the idea that the revenue generated from AI is riskier because it can be easily cut if capital expenditure is reduced. If this happens, it will immediately reflect in disappointing revenue and earnings forecasts. While this scenario has not yet materialized, the risk is considered significant and may be underestimated by many.

NVIDIA's recent performance has been driven by strong demand for its high-end AI chips, which are in high demand as companies like Microsoft, Amazon, Meta, Google, and Tesla compete to build data centers and lead the AI technology wave. This demand has helped NVIDIA maintain strong earnings growth despite ongoing U.S. chip export restrictions. Investors have been bullish on NVIDIA since the company's latest earnings report in late May, which showed strong performance despite these challenges. Since late June, NVIDIA's stock price has continued to set new highs, with a year-to-date gain of over 19% and a rebound of over 68% from its recent low in early April.

Looking ahead, some analysts predict that NVIDIA could reach a market capitalization of 4 trillion dollars this summer and potentially exceed 5 trillion dollars within the next 18 months. This optimism is based on the expectation that the AI technology and application market will see significant growth in the coming years, driven by increased spending from both enterprises and governments. However, the future of NVIDIA's stock price will depend on a variety of factors, including the company's ability to continue innovating in the AI sector and the broader economic and market conditions.