Nvidia Struggles To Keep Its Spot? How One Of The Top Most Valuable Companies Of 2024 Is Facing A Downfall.
Nvidia faces a major drop in shares earlier this week, leading to various concerns about its position as the top most valuable company in 2024.
It is funny and sad how life can be so unpredictable, or, in the least sense, not what we want it to be. And this was what Nvidia went through in recent days. Around June 18, 2024, Nvidia emerged as the most valuable company as per market capitalization, surpassing tech giants such as Microsoft, and Alphabet, the parent company of Google, as well as Apple.
Founded in 1993, Nvidia was launched by Jensen Huang, Chris Malachowsky, and Curtis Priem with the vision of creating advanced graphic processing technologies. In the following years, it launched a multimedia accelerator, NV1, that efficiently integrated 2D and 3D graphics, videos, and audio.
It was in 1999 that Nvidia finally went public, listed on the NASDAQ under the symbol NVDA, as it’s commonly known today. The IPO provided the company with capital to further develop its technology and expand its market presence.
To see Nvidia emerge as the most valuable company of 2024, in the early days of June, was truly an unmatched achievement.To see Nvidia emerge on top of itself speaks to the tonne; it is a clear-cut reflection of how AI is emerging as the most crucial element of technology, which is further signified by its recent ascent past Microsoft in market value. Nvidia’s stock has nearly tripled this year, clearly surpassing Microsoft’s 19% rise, fueled by the unstoppable demand for its AI processors, which are preferable amongst the contenders. This increment in demand has outstripped supply, positioning Nvidia as the prime beneficiary of the AI boom.
LSEG data clearly reflect that Nvidia’s average daily trading turnover has risen to $50 billion, much exceeding the $10 billion average for the already established tech-geek companies like Apple, Microsoft, and Tesla. Currently, on average, 16% of all trades in S&P 500 companies are made by Nvidia. The company’s market capitalization has increased over time in a significant manner as a result of the strong trading activity, which is indicative of a general investor enthusiasm for the company’s AI possibilities, which has played a significant role in the rise of Nvidia to the top.
As even mentioned above, Nvidia’s market value has already tripled this year, expanding from $1 trillion to $2 trillion in just nine months, reaching $3 trillion by June. Another interesting factor favouring this is the heavy investments made by companies such as Microsoft, Meta Platforms, and AI, ultimately enhancing Nvidia’s market position.
Nvidia witnessed rapid revenue growth, with its primary segment being sales of powerful chips to data centres and gaming. Starting at $10.90 billion in 2020, Nvidia’s revenue surged to up to $60.92 billion in early 2024, a massive 458% growth. Despite periodic concerns about overvaluation, Nvidia has consistently surpassed market expectations with strong quarterly results, bolstering its stock price and maintaining strong fundamental valuations.
It was truly an amusing thing to witness as well as to take into consideration to understand and predict the future. How a company that started as one developing gaming technology came all the way to stand with a market valuation of $3.3 trillion as of June 2024
Earlier this week, at least for the past three days, Nvidia has faced the biggest downfall ever, roughly $430 billion in Nvidia’s market cap, with the drop peaking on Thursday. It was on June 20 that Nvidia lost its position as number one to Microsoft in the face of the most valuable company, and what followed was the ultimate downfall in shares.
The whole commotion
Nvidia recently experienced a dramatic drop in its market cap, ending up losing $430 billion over the past three days. Several factors may have contributed to this drop.
Profit-taking appears to have been a significant player in this drop, as investors looked to cash in on Nvidia’s substantial gains following a period of remarkable growth. Market sentiments have been on a shift when it comes to the future of AI.
Along with this, the recent sale of shares worth $95 million this month through an automatic trading plan added pressure to the situation. This occurred right before the annual shareholder meeting and exacerbated investor concerns. Market dynamics also play a role here, with Nvidia’s correction significantly impacting the broader S&P 500 index.
The situation is stable again.
Even after all the commotion that followed the drop in shares, Nvidia’s shares and condition have stabilised since Tuesday. Nvidia’s net income surged to $14.88 billion by April end, and its revenue is said to have tripled to $26.04 billion in the previous year’s quarter. Nvidia’s stock closed at $126.09 per share on June 25, marking a 6.8% increase from its June 18 closing price of $135.58, which had seen a 13% decline. This decrease followed a surge in Nvidia’s stock following a 10-for-1 stock split that became effective on June 10.
The expertise the brand held and the excitement that followed around for its chips for artificial intelligence applications were major reasons for the stock’s recent record rallies.
With Nvidia still being the number one choice for any company when it comes to investing in the AI theme, it still stands as one of the best companies in terms of market valuation.
