Nvidia Stock Eyes Apple’s 2nd Spot After Monster 30% Gain in May

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Chip giant racked up nearly $700 billion in market cap last month and is on track to become the world’s second-largest company.

If you’ve been extremely online and following the headlines for a while, you know how this blog will kick off: Nvidia (ticker: NVDA) crushed, smashed, and shattered all expectations while reporting record profits and revenue. The artificial intelligence (AI) bonanza is so strong it’s literally no-froth-gains-only out there.

Not that much in the loop? Let’s catch you up. For the fiscal first quarter, Nvidia reported record revenue of $26 billion, up 262% year-over year. Along the way, shares of the AI-focused company soared past $1,000 a pop and the stock is now threatening to overtake iPhone maker Apple (ticker: AAPL) as the world’s second-largest company.

Blink and You’ll Miss It. You Blinked, Right?

Not that long ago — in March 2019 — Nvidia was a little-known GPU provider with its niche found in the gaming sector and the crypto mining corner. And, worth mentioning, it was chugging along as the 84th company in the world by market cap with shares changing hands at $30 a piece.

Fast-track to nowadays, Nvidia’s market cap hovers near $2.7 trillion after gaining a monster 3,755% from its March 2019 lows. It also swooped in as the third-biggest company globally, replacing Amazon (ticker: AMZN).

Nvidia’s Big Gains Could Dethrone Apple

The AI mainstay picked up more than $700 billion, or 30%, in valuation over May as its shares hit a record high of $1,160. The big leap positioned the company’s market cap less than 10% shy of Apple’s $2.95 trillion. This said, another $250 billion and Nvidia will become the second-biggest company in the world, trailing Microsoft (MSFT), valued at $3.2 trillion. That is, if Apple stays where it is now.

The iPhone maker, on the other end of the spectrum, is having a rough year. The victim of a monopoly lawsuit, Apple is witnessing its shares linger around a 3% gain for the year, compared with Nvidia’s 130% rise.

What’s more, spiraling iPhone sales in China added to the brewing troubles.

Can Nvidia Sustain Its Bonkers Revenue Growth?

Looking forward, Nvidia expects to rack up revenue of $28 billion for the current quarter. Recent quarterly performance shows that this type of guidance is not only being met, but it’s being comfortably exceeded.

That’s what happens when you have big tech companies lining up to be your loyal customers. Nvidia is happily selling its hot hardware to the biggest and baddest out there — Microsoft (ticker: MSFT), Google (ticker: GOOGL), Tesla (ticker: TSLA) and privately-held ChatGPT parent OpenAI are all scrambling to get their hands on the powerful chips made by Nvidia.

These heavyweights usually pre-order the good stuff and sign contracts worth billions and billions of dollars, allowing Nvidia to predict how much revenue it will bring in over a quarter.

Coming for That Margin

Investors poured hundreds of billions into Nvidia as they sought to capture the AI train. What this has done to the industry is to propel a single company to the forefront while leaving a huge gap for the rest of the companies that a) have ample amounts of cash to invest, and b) are looking to get a piece of the AI action.

Here’s Nvidia’s weak point: it boasts a huge profit margin. For the past quarter, Nvidia churned out a net income of $14.88 billion on its $26 billion revenue. That’s a clear invitation for other players in the ecosystem to swoop in and attack that profit margin.

Rivals such as AMD (ticker: AMD) could be looking to get involved in the battle for margin and launch a product that’s slightly better, slightly faster, and slightly cheaper than what Nvidia is making. The incentive is there — the question is when will a rival roll out a competitive product worthy of attention?

Let’s Hear from You!

What’s your take on Nvidia and the AI race? Do you own Nvidia shares or maybe AMD shares? Join the discussion below.