A meteoric ascent crowned by a record. Wednesday July 9, the NVIDIA processor manufacturer became the first company to see its market capitalization crossing the mark of $ 4,000 billion (3,400 billion euros). The most valued company in the world has managed, in just a few years, to rise to stock markets which now place it ahead of Microsoft ($ 3,700 billion in capitalization), Apple (3,100 billion), Amazon (2,400 billion) …
Do NVIDIA actions are still worth it?
But what should be understood behind the term “market capitalization”? This is simply the amount obtained by multiplying the number of shares in circulation of a company by their current value on the stock market. One of the components of this equation is therefore the value of the shares: the more it is high, the more the capitalization is likely to climb. However, buying dear actions is mathematically reducing the chances of reselling them even more expensive, and therefore to achieve added value. This is without forgetting that on its market, Nvidia saw a Chinese competitor who seems more than serious, Deepseek, which could darken its stock market for its stock market in January. In terms of prices and perspectives, do NVIDIA actions are still worth it? This is what we asked Christopher Dembik, investment strategy advisor at Pictet AM.
Are the biggest stock market capitalizations good deals? Are they not by nature too expensive values?
Christopher Dembik: I think you have to be extremely humble on this subject. Of course, if we look at the valuations, we are at very high ratios. But it must be said that it remains risky to take past benchmarks to estimate the valuation of AI related companies. The reality is that we do not have a complete vision on the good level of valuation of this technology. We do not yet know how much it will impact the economy, nor what the speed and impact of its integration in businesses, etc. will be the speed and impact of its integration. Today, making a comparison with the Internet bubble does not seem very relevant, it is not the same technology, and the quality of companies is very different. IA -related companies have profitability levels and liquidity quantities that companies in the Internet bubble have ever had. You have to be realistic and recognize that we do not have a repository today to know if these actions are really expensive or not.
Compared to the very high levels of valuation of the very beginning of the year, where is the value of the Nvidia action?
We stay below, this is the “good news”, because we were at very high levels of valuation at the start of the year, which made investors hesitate. In addition to valuation, we also have very positive anticipations on the next quarterly results. It must be recognized, however, that part of the results will be swollen by the effect of the exchange rate, because Nvidia is an international focused company. Therefore, a decreased dollar will necessarily inflate the benefits a little (a low currency facilitates exports, editor’s note). But we remain on turnover anticipations, gross margin and very positive, with a lot of demand. There will be moments of stock market corrections, which is normal, but we have no concern about the fundamentals of this title.
In addition to AI, has Nvidia have other outlets to stay at the top of global stock market capitalizations in the future?
There are two elements on which Nvidia is working at the moment. The first is the link between AI and robotics. No business works at this level on the subject currently. Some industrial robots are starting to use AI, but that remains quite limited, but it is quite consensual that it is the next major development line of the AI. Nvidia also understood that sooner or later will come from competitors offering flea as efficient and less expensive as its own. They have therefore tried since the start of the year to create a software ecosystem that will make NVIDIA essential in all systems using AI, even with fleas from another supplier. And so, yes, it is a safe bet that Nvidia will remain in the trio of heads of the first stock market capitalizations in the years to come.
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