We've written a lot over the past months - as has every financial media organization - about the meteoric rise of Nvidia Corporation (NASDAQ: NVDA), the artificial intelligence (AI)-linked semiconductor stock.
We've asked a lot of questions: Is it overvalued after a 1,634% rise over the past four years? Can the promise of AI deliver the earnings growth expected of the company? Is its position among the mega-cap stocks truly deserved?
The first two questions above will only be answered in hindsight, and the third can only be tackled by comparing Nvidia with a similar-sized company. Apple Inc. (NASDAQ: AAPL) for instance.
Apple has the larger market cap - $2.61 trillion. Nvidia is not far behind, sitting on a valuation of $2.29 trillion.
Staggering Growth
Apple's growth has been far more steady. When it launched the iPhone in 2007, its market cap was around $62 billion. A decade later it was $556 billion.
Nvidia, by comparison, stayed flat throughout this period with a market cap just above $2 billion
The following data were compiled by Charlie Bilello, chief market strategist at Creative Planning, which he posted on X on Thursday.
Here are Bilello's findings:
- 10 years ago: Apple market cap 47x larger than Nvidia
- 7 years ago: Apple market cap 13x larger than Nvidia
- 5 years ago: Apple market cap 9x larger than Nvidia
- 3 years ago: Apple market cap 7x larger than Nvidia
- 1 year ago: Apple market cap 4x larger than Nvidia
- Today: Apple market cap 1.1x larger than Nvidia
Apple took four years to add its most recent trillion.
Is Nvidia Overvalued?
Isn't this bubble territory? Analysts don't think so. Many believe Nvidia warrants this valuation because of its earnings creation and its earnings potential.
Two days ago, investor and financial TV host featured the stock on his CNBC program saying that given the company's ability to consistently beat market earnings expectations, its valuation was not excessive.
Meanwhile, it's become a favored stock of retail investors according to a recent note from Vanda Research with purchases exceeding $1 billion over a 10-day period, compared to just $500 million of Tesla Inc. (NASDAQ: TSLA) shares.
"Trading is about mood and momentum, and when you think mood and momentum, I don't think I have ever seen a company celebrated as much as Nvidia," said Aswath Damodaran, professor of finance at Stern School of Business, New York University, in an interview on CNBC last week.
Damodaran did, however, caution that the pricing may have got a little out of control.
We will know with hindsight.