Nvidia is now the second-most valuable public company in the world. Photo by Costfoto/NurPhoto via Getty Images.
Key Takeaways
- Nvidia’s latest stock market rally has seen the company eclipse Apple.
- Since the beginning of 2023, the firm’s share price has increased eightfold.
- But Nvidia stock could have reached its top.
Nvidia’s stock market value has surged past $3 trillion, surpassing Apple to become the second most valuable publicly listed company in the world. But after the company’s share price increased eightfold since the beginning of 2023, can Nvidia’s run continue?
The firm’s impressive gains in the last 18 months have been built on soaring demand for its GPUs from the AI sector. However, emerging competition in the space could threaten Nvidia’s lead.
Rival Chip Makers Threaten Nvidia AI Dominance
Since they first hit the market last year. Nvidia has sold its highly sought-after H100 GPUs for as much as $40,000 apiece. And with little competition in the AI chip space, data centers have had no alternative but to pay up.
But as the market heats up, new competitors are entering the arena.
While it may not boast the same performance, at $15,000, AMD’s MI300X is a much cheaper alternative which has been eating into Nvidia’s market share since it was launched in December.
Looking forward, Intel is slated to launch the Gaudi 3 accelerator later this year, further threatening Nvidia’s dominance.
Emerging Competition
Alongside rising competition from established players, new entrants could also disrupt the AI chip market
Softbank founder Masayoshi Son and OpenAI CEO Sam Altman have both pitched AI chip manufacturing ventures that could raise hundreds of billions of dollars. Meanwhile, dozens of startups are exploring innovative technologies that may ultimately supersede the Nvidia GPUs that currently dominate.
Finally, Nvidia’s largest customers are looking to reduce their dependency on its hardware. Collectively, Microsoft, Meta, Amazon, and Alphabet account for around 40% of Nvidia’s net sales. And every one of them has started to build AI chips in-house.
Export Restrictions
Alongside rising competition, Nvidia faces political headwinds that could also impact its bottom line.
After Washington banned exports of H100 and A100 chips to China in 2022, the firm released the less powerful A800 and H800 specifically for the Chinese market. But in October, the government imposed export restrictions on these too.
Of course, Nvidia isn’t the only firm that has been hit by US sanctions against China. But any further increase in trade restrictions could hurt its profits in an important market.
Stock Split Could Signal Nvidia Peak Price
With Nvidia shares currently trading at over $1,200, the stock will undergo a 10:1 split on Friday, June 7.
“By splitting its shares, the company not only improves accessibility and liquidity but also sends a signal of confidence in its future growth,” xs.com market analyst Antonio Ernesto Di Giacomo said to CCN.
On the other hand, trader Gareth Soloway thinks the stock split could be a “topping signal” that indicates a looming price correction.
“I do look at a lot of the momentum to the upside is people chasing the trade and the stock split excitement,” he observed. However, “once we get it, it’s much like when the Bitcoin ETF got approved, we saw Bitcoin come down 20% off of those highs, very, very quickly.”
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