Nvidia beats Alphabet with surging market cap driven by high demand for AI tech

Nvidia has officially outpaced Google's parent company, Alphabet, in market value.

Nvidia beats Alphabet with surging market cap driven by high demand for AI tech
A screen tracks NVIDIA Corp. as a trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 23, 2023. REUTERS/Brendan McDermid/File Photo

The backstory: As you might recall, back in 2022, OpenAI's ChatGPT caused quite a stir in the tech world, pulling heavyweights like Google and Microsoft into the quickly developing artificial intelligence (AI) scene. This AI excitement also boosted tech stocks, especially for companies like Nvidia

Nvidia's graphics processing units (GPUs) are some of the best chips used to train AI, and they became hot commodities as the demand for deep-learning AI models surged. As a result, Nvidia's stock skyrocketed by 239% last year, making it a standout in the AI boom. And in a major milestone last May, Nvidia became the first semiconductor company to hit a market value of US$1 trillion, joining the ranks of tech giants like Apple and Microsoft.

More recently: Last year, Nvidia dove headfirst into AI under CEO Jensen Huang's leadership. The company rolled out various AI innovations and teamed up with Foxconn to create "AI factories" for crafting smart technologies like self-driving cars and large language models.

But Nvidia also faced some challenges, which were highlighted in its third quarter report card last November. For example, sales in China fell because of new US export restrictions on advanced chips and tools to Chinese companies, which were introduced last October. These were on top of similar chip curbs already in place. This mostly hit Nvidia's A800 and H800 AI chips, which were initially made exclusively for the Chinese market to get around the first set of export limits.

The development: Nvidia has officially outpaced Google's parent company, Alphabet, in market value. This happened on Wednesday when Nvidia's stock rose over 2%, reaching US$739 per share. The boost pushed Nvidia's total market value to US$1.83 trillion, topping Alphabet's US$1.82 trillion market cap. It's worth noting that Nvidia also recently beat Amazon in market value, something that hadn't happened since 2002. With this, Nvidia is now the third-largest US company, right behind Apple and Microsoft. Meanwhile, investors are eagerly waiting to hear about Nvidia's earnings on February 21, with analysts predicting a 118% annual sales growth to US$59.04 billion.

Key comments: 

"The valuation for this company is based on a very rapid growth rate. Anything that could potentially derail that growth rate would have a very negative impact on that valuation," said Dave Sekera, chief US market strategist at Morningstar, in a note on Monday. "Investors should proceed with caution."

"The market recognizes Nvidia as the AI king. But if Nvidia has one bad quarterly report, if they don't overly-exceed investors' expectations, this thing could sell off 20 or 30 percent in one after-hours session," said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa.

"A new type of manufacturing has emerged – the production of intelligence. And the data centers that produce it are AI factories," said Nvidia CEO Jensen Huang last year.