Blue Whale News, June 19th (Reporter Zhu Junxi) - After the fierce market value competition this week, chip company Nvidia has finally surpassed Microsoft and ascended to the throne of the world's most valuable company. On June 18th Eastern Time, Nvidia closed at $135.58 per share, up 3.51% from the previous day, with a total market value of $3.34 trillion. Microsoft has a market value of $3.32 trillion, while Apple ranks third with $3.29 trillion.
Since the beginning of this year, Nvidia's stock price has risen by over 170%, and the company's market value has also increased by over $200 billion. From $2 trillion to $3 trillion in market value, Nvidia only took 96 days, compared to 945 days for Microsoft and 1044 days for Apple.
Daniel Ives, an analyst at Wade Bush Securities in the United States, pointed out in a report that in the next year, Nvidia, Apple, and Microsoft will become the focus of the $4 trillion market value competition in the technology sector. More optimistic analysts predict that Nvidia's market value may rise to $5 trillion in the following year.
Nvidia is the biggest beneficiary of the AI wave. Major technology companies are investing in the AI arms race, and the development and training of large models are indispensable for GPUs and other chips, while Nvidia plays the role of a shovel seller. As the world's largest AI chip manufacturer, Nvidia holds over 80% of the market share. Its main customers include technology giants such as Microsoft, Google, and Amazon, who need to spend billions of dollars to purchase Nvidia chips.
While Nvidia was still writing the growth myth, some investors were alert and could not help comparing Nvidia with Cisco, the typical representative of the Internet foam. In the early development stage of the Internet more than 20 years ago, Cisco was the dealer at that time, supplying network switches, routers and other hardware equipment. In 2000, Cisco's market value once rose to $555 billion, surpassing Microsoft at the time to become the world's highest company by market value. But one year later, with the collapse of the Internet economy foam, its market value fell below $100 billion and has not returned to its peak.
Founder and CEO of Ark Investment, Cathie Wood, had previously warned Nvidia through Cisco's experience that it may repeat its mistakes and face the risk of slowing growth. "If there were no explosive growth in software revenue to justify the excessive construction of GPU capacity, we would not be surprised to see a pause in expenditure, exacerbating the correction of excess inventory, especially among cloud customers who account for more than half of Nvidia's data center sales," she said.
Increasing investment in AI has become a common theme in the financial reports of technology giants, and Nvidia undoubtedly benefits greatly from it. But the huge expenses and the still exploring commercialization are like lingering shadows, making it uncertain how long this AI wave will last, and technology companies may choose to retreat due to performance pressure.
In April of this year, Meta announced in its first quarter financial report that it would increase its annual capital expenditure from $30-37 billion to $35-40 billion to support AI product development and data center infrastructure construction. At the same time, its performance outlook for the second quarter was also lower than expected. CEO Zuckerberg acknowledged that Meta is intensifying its efforts to build AI models and services, but these new products have not yet been commercialized and will take years to expand into profitable services.
Even the industry leader OpenAI is still in a loss making state. Its CEO Sam Altman previously stated that as OpenAI develops more complex models, it is expected that expenses will continue to exceed revenue growth and may need to raise billions of dollars to cover these costs.
But the situation for Nvidia and Cisco is not exactly the same. Morgan Stanley pointed out in a March report that the current AI infrastructure construction is still in its early stages, and Nvidia is not yet approaching the market peak. Cisco's revenue growth rate in 2000 was 59%, but its predicted P/E ratio was as high as 138 times. Nvidia's current projected P/E ratio is about 52 times, with the latest revenue growth rate reaching 262%.
In addition, Cisco mainly engages in the hardware business, but Nvidia not only has hardware products such as GPU chips and graphics cards, but also has a powerful software platform called CUDA, jointly building a solid moat. Michael Lippert, Vice President and Portfolio Manager of investment management company Baron Capital, told Bloomberg that Nvidia is not just a chip seller, but also provides systems, and its proprietary software and development ecosystem are factors for success.
Although Nvidia still dominates the AI chip market, it cannot be denied that competition will intensify in the future. Intel, AMD, ARM and other chip manufacturers are striving to catch up and launch AI chips that benchmark performance against Nvidia. Major clients such as Microsoft and Google also hope to reduce their dependence on Nvidia and are intensifying their self-developed chips. Nvidia has noticed that a minority of giant customers contribute more sales revenue, but also bring more risks. It hopes to develop its business more diversified.
Huang Renxun, the founder and CEO of Nvidia, said in the first quarter of this year's financial report that AI is expanding to national sovereignty, consumer Internet companies, automobile manufacturers and healthcare customers, and these opportunities may "create multiple vertical markets worth billions of dollars" in addition to cloud manufacturers.
But Nvidia cannot be immune to external objective factors. The United States has implemented a series of AI chip export restrictions since 2022, prohibiting Nvidia from exporting the most advanced versions of chips to China. China used to be one of Nvidia's largest markets, and Nvidia revealed at the Q1 performance meeting that although it supplied unregulated high-performance chips to China, data center revenue from China still significantly decreased compared to before the implementation of export controls.
In the United States, Nvidia's soaring market value has also attracted the attention of government regulatory agencies. According to the New York Times on June 5th local time, the US Department of Justice will lead an investigation into whether Nvidia has violated antitrust laws. At the same time, the Federal Trade Commission will also lead the review of transactions between OpenAI, Microsoft, and other AI companies.
If Nvidia is found to have monopolistic behavior, it may face significant fines, business splits, or adjustments, weakening its position in the AI chip field. However, the regulatory results and implementation measures are currently unclear, and Nvidia still has time to continue consolidating its influence in the AI revolution.