1 Unstoppable stocks expected to join Apple and Microsoft’s $2 trillion club in 2024

Achieving a $1 trillion valuation is one of the most prestigious milestones a company can achieve, and it typically requires decades of consistent operational excellence. That’s why his only six U.S. companies are now valued at more than $1 trillion.

1. microsoft
2. apple
3. Nvidia (NVDA 0.35%)
4. alphabet (Google parent company)
5. Amazon
6. meta platform

However, Apple and Microsoft are the only two companies currently valued at more than $2 trillion. In fact, before the recent stock market crash, each was worth more than $3 trillion.

Another company will join them and it seems almost certain that they will stay there. On Friday, within his first hour of market opening, Nvidia surpassed his $2 trillion mark, but ended the day with a major milestone. As of this writing, his value has reached $1.97 trillion, of which $1 trillion was generated in the last 12 months alone. Following another impressive set of financial results released this month, Nvidia is now hurtling toward a $2 trillion market cap. Here’s why it’s likely to get there and stay there this year.

Nvidia has a rich history of innovation

Nvidia was founded in 1993 with the goal of bringing 3D graphics to the gaming and multimedia industry. In 1999, he released the world’s first graphics processing unit (GPU), which marked the birth of his GeForce brand, which remains a dominant name in the gaming industry today.

But now GPUs are transforming data centers. With hundreds of cores, GPUs can process large amounts of data much faster than traditional central processing units (CPUs), making them ideal for artificial intelligence (AI) workloads. Nvidia designed his H100 GPU for that specific purpose and has been almost single-handedly responsible for the company’s incredible growth over the past year.

While H100 is already the first choice for most AI data center operators, Nvidia’s innovation engine is hard at work developing the next version. It’s called H200 and it’s twice as fast as H100 when it comes to inference. Inference involves feeding live data to an AI model to make predictions. Additionally, energy consumption is halved, significantly lowering operating costs for data center operators. H200 shipments are expected to increase this year, but NVIDIA has already said it will be impossible to keep up with demand.

Image source: Nvidia.

Nvidia is more than just an AI hardware provider

Much of Nvidia’s success can be attributed to its increasingly important software ecosystem. The CUDA platform allows a developer to optimize his GPU, allowing him to develop applications faster. But here comes the problem. CUDA is not available on chips from other manufacturers, so developers who are used to CUDA will have to stick with their Nvidia GPUs. That’s why it’s so difficult for competitors to overturn his Nvidia advantage.

But that’s not all. According to CEO Jensen Huang, Nvidia engineers are currently managing, optimizing, patching, and tweaking his AI software stack for enterprises through the AI ​​Enterprise platform. It is effectively an artificial intelligence operating system that provides development tools and pre-trained models to help companies accelerate the creation of AI applications.

Nvidia AI Enterprise is accessible through major cloud platforms including Amazon Web Services, Microsoft Azure, and Google Cloud. These platforms effectively act as distribution channels, giving Nvidia access to millions of potential customers.

Huang believes that all companies around the world deploying software will eventually use Nvidia AI Enterprise. It was only launched in 2021, before AI became mainstream, but it has already reached $1 billion in annual revenue.

Nvidia’s revenue growth is booming thanks to AI

Nvidia reported financial results for fiscal year 2024 (ending January 28). That revenue soared to his $60.9 billion, a 126% increase over his 2023 fiscal year, and as the chart below shows, he’s increased more than 10x in the past eight years alone.

Data centers were a key driver of Nvidia’s impressive fiscal year, thanks to AI and H100 GPUs. The data center segment accounted for $47.5 billion (78%) of the company’s total revenue, marking a 217% increase over 2023.

The company expects that momentum to continue into the first quarter of fiscal 2025. Its forecast is for total revenue of $24 billion, representing 233% growth compared to the first quarter of fiscal 2024. But investors really need to focus on the long term. Because Nvidia believes the generative AI revolution is just beginning.

Jensen Huang believes that computing acceleration and generative AI will double the current installed base of global data center infrastructure, worth hundreds of billions of dollars over the next five years. says he.

Nvidia is a stone’s throw from the $2 trillion club

As mentioned at the beginning, Nvidia is currently worth $1.97 trillion. The company has already eclipsed tech giants such as Amazon and Alphabet in valuation, and an additional 1.5% rise would put it in the $2 trillion club alongside Apple and Microsoft.

Based on Nvidia’s fiscal 2024 non-GAAP (adjusted) earnings per share of $12.96 and current stock price of $788.17, it has a price-to-earnings ratio of 60.6x. This is almost double the company’s P/E ratio of 32.1. Nasdaq-100 This means that Nvidia is very expensive. But the stock market is a forward-looking machine.

Wall Street already expects Nvidia’s fiscal 2025 earnings to be $20.44, which would lower the P/E ratio to 37.9x (assuming the stock price stays the same). It’s still more expensive than the Nasdaq 100, but a company growing as fast as Nvidia deserves a premium. There is a possibility that there will be a major upward trend in the future.

Wall Street analysts at Loop Capital think NVIDIA stock could rise 53% to $1,200. That would put NVIDIA’s valuation at about $3 trillion. This goal is a little ambitious, if not unrealistic, in the short term, but if Jensen Huang’s judgment about the data center opportunities over the next five years is correct, the stock is firmly positioned there in the long term. may be reached.

Either way, NVIDIA’s entry into the $2 trillion club now seems like a foregone conclusion.