Nvidia Surpasses Microsoft to Become World's Most Valuable Stock

Nvidia (NVDA) overtook Microsoft (MSFT) on Tuesday to become the world's most valuable company, just two weeks after surpassing Apple (AAPL) for the No. 2 spot.

Nvidia's stock price rose by approximately 3.5%, reaching over $135 per share and giving the chipmaker a market capitalization of more than $3.33 trillion. Meanwhile, Microsoft's market cap fell to nearly $3.32 trillion following a 0.4% decline on Tuesday.

Over the past 12 months, Nvidia's shares have skyrocketed by more than 215%, and an astonishing 3,400% over the last five years. Year-to-date, Nvidia has surged 175%, while Microsoft's stock has risen just under 19% in 2024.

Nvidia first surpassed a $1 trillion market cap on June 13, 2023. It quickly climbed past $2 trillion on March 1, and then rapidly crossed the $3 trillion mark on June 5, setting a record for the fastest climb from $1 trillion to $3 trillion.

This surge has made Nvidia a top weighting in the S&P 500 (^GSPC), significantly contributing to the index's record highs in 2024. As of Monday, Nvidia's stock gains accounted for about one-third of the S&P 500's year-to-date rise, according to Citi's equity research team.

The company's rise is fueled by the AI boom, which began with OpenAI's ChatGPT platform in late 2022. Nvidia's chips, modified graphics cards, and CUDA software platform are essential for AI programs, giving it a strategic edge over rivals AMD (AMD) and Intel (INTC).

Nvidia is the go-to supplier for AI chips and software for tech giants like Amazon (AMZN), Google (GOOG), Meta (META), Microsoft, and Tesla (TSLA). CEO Jensen Huang announced at the Computex conference that Nvidia will release its high-powered Blackwell Ultra chip in 2025 and a new AI chip platform, Rubin, in 2026, followed by an Ultra version in 2027.

In Q1, Nvidia reported adjusted earnings per share of $6.12 on revenue of $26 billion, marking jumps of 461% and 262%, respectively, from the same period last year. Data center revenue surged 427% year-over-year to $22.6 billion, making up 86% of the total revenue, while the gaming segment generated $2.6 billion.

Despite Nvidia's dominance, AMD and Intel are advancing their own AI chips. AMD's MI325X and MI350 will debut in 2024 and 2025, with the MI400 AI accelerator platform following in 2026. Intel's Gaudi 2 and Gaudi 3 AI accelerators aim to undercut Nvidia on price, appealing to companies looking to cut costs.

Additionally, Nvidia faces competition from its own customers, as Amazon, Google, and Microsoft develop their own AI chips to reduce dependency on Nvidia and save on capital expenditures.