After surpassing a $3 trillion market capitalization and briefly becoming the world’s most valuable company last month, Nvidia has lost and regained hundreds of billions of dollars in value in recent days.
While the chipmaker’s volatility has raised some concerns about the sustainability of the stock market’s artificial intelligence (AI) boom, experts say Nvidia’s ups and downs are “bumps in the way” as it continues its rise. meteoric.
“The godfather of AI, Jensen [Huang]and Nvidia are leading the AI revolution, and I see this recent sell-off as a blip on the radar,” Wedbush Securities analyst Dan Ives told The Hill, referring to the company’s co-founder and CEO.
Nvidia surpassed the $3 trillion mark for the first time in early June, joining the elite club inhabited only by Microsoft and Apple. Less than two weeks later, the chipmaker briefly surpassed Microsoft as the world’s most valuable company.
The milestones reflect Nvidia’s rapid rise, which surpassed $1 trillion for the first time just over a year ago. In February, the company had surpassed US$2 trillion. Since the beginning of the year, its share price has risen more than 150 percent.
Nvidia’s success has been largely driven by its graphics processing units (GPUs), which have been instrumental in driving the AI boom. The chipmaker’s GPUs are in high demand as major technology companies race to develop and launch their own AI models.
“They are the only game in town,” Ives said, adding: “Their GPUs and their chips are the new oil and gold for technology.”
However, the chipmaker suffered a turnaround last week when its share price plunged 16% and caused the company to lose $550 billion in value – more than the entire market capitalization of Walmart or Visa.
Nvidia shares partially recovered in the following days, bringing its market capitalization back to more than $3 trillion. It is currently once again the third most valuable company in the world, behind Microsoft and Apple, with no other competitor close behind.
The chipmaker’s high level of volatility is unusual for such a large company, said Jim Smigiel, chief investment officer at financial services firm SEI.
Nvidia’s volatility is much higher than that of its closest competitors and the market in general. It has a historical 20-day volatility of 44 percent, while Microsoft and Apple are around 14 percent and 23 percent. VIX, a measure of expected market volatility, is currently at 12:09.
“Having a volatility measure that is roughly triple, even quadruple the market, is not unusual for a small-cap stock,” Smigiel told The Hill. “To have this be the biggest stock in the index and the biggest company in the world is highly unusual.”
The chipmaker’s recent moves have raised questions about the sustainability of its rapid rise, noted Stacy Rasgon, a senior analyst at Bernstein Research who focuses on the semiconductor industry.
“The big question that people have about these stocks right now is just sustainability,” Rasgon said. “It’s just that the numbers have gotten so big so quickly that you have to wonder: can they keep going?”
While Rasgon acknowledged it’s impossible to know the answer, he said he’s not worried about Nvidia over the next year or two and suggested its latest fluctuations don’t “mean much.”
“I don’t think it means anything about the long-term outlook,” he said. “He had a huge run and backed off a little bit.”
Likewise, Ives dismissed recent share price swings as “bumps in the road” for the chipmaker.
“We will see ups and downs in this parabolic move for Nvidia as well as technology,” Ives said. “But I just see this as a bump in the road to a $4 trillion market cap for Nvidia as we look to 2025.”
“I think this will be, in the spirit of the Summer Olympics, a race between Nvidia, Microsoft and Apple, but ultimately we will see three $4 trillion market caps next year, with Nvidia likely to be the first to overtake that limit,” he added.
As of Thursday, Microsoft’s market capitalization was $3.42 trillion, closely followed by Apple at $3.40 trillion, while Nvidia trails further behind at $3.16 trillion.
This story originally appeared on thehill.com read the full story
