Nvidia’s share price surged over 3% on Tuesday, propelling the chip maker to the top spot as the most valuable company globally, surpassing tech giant Microsoft.

Impressive Stock Performance

• Nvidia shares jumped by 3.5% to $135.58, driving its market capitalization up by over $110 billion to $3.335 trillion. This achievement comes shortly after surpassing Apple to claim the second spot in market value growth.
• The company’s market value soared from $1 trillion to $2 trillion in just nine months by February, and in a little over three months, it skyrocketed to $3 trillion in June.

Market Comparison

• Microsoft’s share price dipped by 0.45%, reducing its market value to $3.317 trillion. Apple also experienced a decline of over 1%, leaving its value at $3.286 trillion.
• Nvidia’s share price has nearly tripled this year, a stark contrast to Microsoft’s modest 19% increase in shares.

Strategic Move

• Last week, Nvidia split its stock 10-for-one, making its highly valued stock more accessible to individual investors.

Driving Force: AI Technology

The surge in Nvidia shares and market value is fueled by optimism surrounding emerging Artificial Intelligence (AI) technology.

Wall Street Dominance

• Nvidia’s stock price surge has propelled the S&P 500 and Nasdaq to record highs.
• The chipmaker has become the most traded company on Wall Street, with daily turnover averaging $50 billion, far surpassing Apple, Microsoft, and Tesla.
• Nvidia now represents about 16% of all trading in S&P 500 companies.

Superior AI Processors

A high demand for Nvidia’s AI processors, known for their superiority over competitors’ offerings, has resulted in tight supply. Many investors see Nvidia as the prime beneficiary of the rapid advancement in AI technology.

Nvidia’s Stock Split and Potential Dow Inclusion

Nvidia’s 10-for-1 stock split, designed to attract retail investors, has taken effect, raising speculation about the company’s potential inclusion in the blue-chip Dow index.

Purpose of the Stock Split

The purpose of the split is to lower the per-share price, making it more affordable for employees and investors. This move increases the number of shares available without changing the overall value of the stock.

Impact on Market and Investors

• “An effect of Nvidia’s stock split is that it might join Amazon and Apple in the Dow, possibly replacing Intel, which currently has the lowest weighting,” said Ben Laidler, global markets strategist at digital brokerage eToro.
• On Monday, Nvidia’s stock dipped 0.5% in premarket trading, after rising nearly 27% since the company announced the share split and a strong forecast last month. The leading AI chip maker also reached a market value of $3 trillion, surpassing Apple to become the second-most valuable company in the world, just behind Microsoft.

Investor Behavior and Stock Valuation

• Market analysts noted that stock splits tend to attract individual investors who trade smaller amounts and have less capital compared to institutional investors.
• However, Goldman Sachs strategists led by David Kostin mentioned in a note that most recent stock splits haven’t significantly increased retail trading activity, with a few exceptions like Amazon’s split in 2022 and Nvidia’s 2021 split.
• Additionally, the strategists pointed out that “investors typically assign higher valuations to liquid stocks because of their low trading costs and flexibility in various market conditions.”
• Goldman’s analysis of 45 Russell 1000 stock splits since 2019 showed that trading volumes briefly increased following split announcements but changed little during and after the splits took effect.

Nvidia’s stock was last trading at $120 per share post-split, down from $1,200 on Friday, making it a potential candidate for the 30-member price-weighted Dow index.

Nvidia, a favorite on Wall Street for its role in artificial intelligence, continues to soar to incredible heights.

Market Capitalization Milestone

On Wednesday, the AI chipmaker’s market capitalization reached $3.019 trillion, slightly surpassing Apple’s $2.99 trillion market cap, making Nvidia the second-largest publicly traded company in the US, just behind Microsoft, which has a market cap of $3.15 trillion.

• Nvidia is now the third US company, following Apple and Microsoft, to cross the $3 trillion mark.

Stock Performance

Shares of Nvidia, based in Santa Clara, rose 5.2% to about $1,224.4 each, while Apple shares ended up 0.8% at $196.

Market Impact

These gains also helped the S&P 500 and Nasdaq indexes reach new record highs on Wednesday.

AI Craze on Wall Street

Nvidia (NVDA) has benefited the most from the AI craze on Wall Street this year; the stock is up 147% so far this year after rising 239% in 2023. In contrast, Apple shares have gained about 1.7% year-to-date.

Advanced AI Chip Platform

Earlier this week, Nvidia CEO Jensen Huang announced that the company would introduce its most advanced AI chip platform, Rubin, in 2026. Rubin will replace the Blackwell, which provides chips for data centers and was announced in March. Nvidia called it the “world’s most powerful chip” at the time.

Analysts’ Outlook

Nvidia accounts for around 70% of AI semiconductor sales, and some analysts believe the stock has more room to grow. Angelo Zino, senior equity analyst at CFRA Research, noted, “As we look ahead, we think NVDA is on pace to become the most valuable company, given the numerous ways it can monetize AI and our belief that it has the largest market expansion opportunity in the Tech sector.”

Stock Split Announcement

Shares of the company will soon become more affordable. Nvidia announced a 10-for-1 stock split last month, making shares more accessible for individual investors. The post-split shares will start trading on June 10.

Two ways have arisen since Nvidia’s (NVDA) significant quarter and projection on Wednesday night.

Wall Street owns and runs track one, and it thinks Nvidia will keep accelerating to new profit levels this year and next. Consensus forecasts are rising (again), and the Street is still rather fond of inflated price goals (you can monitor them on Yahoo Finance here).

The media owns and runs the other track, and it’s trying harder and harder to undermine the Nvidia investment case. Hey, I understand; it’s our responsibility to question leaders, statistics, and widely accepted stories.

But to be out there promoting that Nvidia’s stock is in a bubble because it’s up a lot or that its financials may be in a bubble because of eye-popping growth rates, strikes me as totally incorrect.Let me state up front that I do not own shares in Nvidia and never have, hence I have no vehicle in this race.

Simply stated, there are a few basic characteristics of an asset bubble.

First off, the item that is increasing in value often lacks the foundation to support such increase. Two: Mostly because everyone else is purchasing it, people are buying the asset mindlessly without understanding it.

Both of these are not visible to me for Nvidia.

Investors are purchasing for the right reasons and seem to be well informed about Nvidia’s company.

Then the growth rates of Nvidia support a higher price. In the first quarter alone, this firm increased profits by 461%! 262 percent increase in sales!

Cause? Since generative AI, driven by models supported by Nvidia GPUs, is causing a massive upheaval in IT stacks. Nobody can even come close to the technology of this firm. Talking about worries about Apple (AAPL) and Amazon (AMZN) developing their own AI processors is OK, but Nvidia is doing this on a large scale and is 27 miles ahead of these businesses.

“People want to deploy these data centers right now,” Nvidia CEO Jensen Huang said in an exclusive interview with Yahoo Finance’s Julie Hyman and Dan Howley immediately after results (see video above). “They want to begin earning money and saving money immediately by putting our [graphics processing units] to use. Therefore, the demand is really rather great.”

Will Nvidia continue to see triple digit increases in both its top and bottom lines? No, but the growth rates will still be much higher than those of rivals and still rather remarkable.

Bubble? People, let’s be genuine here!

Amazon AWS has started manufacturing AI chips in order to better manage a supply chain that is lacking these potent tools. The approach is covered by AWS CEO Adam Selipsky in a recent edition of the Opening Bid podcast. Just listen down below.