AI optimism drives Nvidia stock past Amazon, market cap poised to overtake Alphabet soon too

Chip-maker Nvidia is poised to surpass Google's parent Alphabet as the third most valuable company on Wall Street, as per reports. The expectation comes after the Santa Clara-based artificial intelligence (AI) chipmaker's market capitalisation reached $1.78 trillion on February 13, eclipsing Amazon's $1.75 trillion for the first time in two decades.

On February 13, Nvidia's shares slipped by 0.17 percent, closing at $1.78 trillion, while Amazon's stock declined by 2.15 percent, resulting in a market value of $1.75 trillion. Google-owner Alphabet also saw a dip of 1.62 percent, with its market capitalisation settling at $1.81 trillion. The gap seems surmountable, especially as demand for Nvidia's AI chips remains high.

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Why is Nvidia Soaring?

The surge in Nvidia's stock is attributed to the insatiable demand for its accelerators powering AI tasks. Nvidia has become a major player in the technology sector's push to integrate AI into products and services. The company's graphics processors are in high demand, and at present Nvidia controls around 80 percent of the high-end AI chip market.

Big Tech players such as Meta Platforms are investing billions of dollars in Nvidia's products. However, the heightened demand for its graphics processors has resulted in shortages of its components.

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Lead times for Nvidia's premium H100 processor have decreased, but the overall demand remains considerably higher than the available supply, according to Mizuho analyst Vijay Rakesh.

Largely the company growth has come as Nvidia dominates around 80 percent of the high-end AI chip market, which has contributed to a 46 percent increase in its stock value this year, following a more than threefold surge in 2023. The optimism around AI has also propelled technology-related companies such as Microsoft and Meta to record highs.

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Wall Street Responds to Nvidia's Red-Hot Rally

In 2024, Nvidia's remarkable performance has led several Wall Street firms to raise their price targets.

UBS Group AG and Mizuho Securities joined others, including Morgan Stanley, Bank of America Corp., and Goldman Sachs Group Inc., in adjusting their price targets ahead of the company's February 21 earnings announcement.

This week, UBS increased its target to $850 from $580, also revising its earnings per share estimates upward. Mizuho raised its target to $825 from $625, emphasising the persistently high demand for Nvidia's H100 AI accelerators. Vijay Rakesh of Mizuho described the stock as the top choice for AI investments.

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The company's shares have surged by 46 percent this year, adding approximately $560 billion in market value.

Market Position and Analyst Expectations

Nvidia with its market share stronghold has outperformed its big-tech counterparts. Despite the stock's rise, analysts struggle to keep pace, with the average 12-month price target of $690 lagging behind the closing price on February 13.

Analysts attribute Nvidia's success to the ongoing AI boom, with massive capital expenditures in data centres. The company has gained over $600 billion in market value in the new year, outpacing its growth in the last seven months of 2023.

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In the competitive landscape of AI-driven technologies, Nvidia continues to make strides, posing a formidable challenge to established market leaders. The company's upcoming earnings report on Feb. 21 will be closely watched as it navigates the dynamic tech market.

(With inputs from Bloomberg and Reuters)