Nvidia, known for its dominant position as a provider of chips used for training AI systems, has had an impressive start to the year. The company's stock has outperformed other major technology companies, and if this rally continues, Nvidia could even close in on Amazon's market valuation.
Record Highs and Continued Enthusiasm
This week, Nvidia's stock soared to record highs, driven by the widespread enthusiasm surrounding artificial-intelligence technology showcased at the prestigious CES tech trade show in Las Vegas. With its strong presence in the AI chip market, Nvidia has solidified its position as the go-to choice for developers and researchers in the field.
A Bullish Outlook
According to Katie Stockton, market technician and founder of Fairlead Strategies, Nvidia's recent breakout above key resistance levels signifies a bullish intermediate-term development. She also highlights a crucial zone of resistance to watch, with a potential share price of approximately $602.
Closing the Gap on Market Cap
With its short-term outperformance, Nvidia has a chance to surpass Amazon and secure the fourth spot in terms of market capitalization among U.S. companies. Currently valued at around $1.31 trillion, Nvidia has significantly closed the gap on Amazon, which carries a market valuation of $1.56 trillion. This marks a notable shift from about 18 months ago when Amazon's worth was nearly three times that of Nvidia.
As the year progresses, all eyes will be on Nvidia to see if its impressive performance continues and if it can indeed scale new heights within the technology sector.
Nvidia Vs. Amazon: The Battle for AI Dominance
In the realm of artificial intelligence (AI), Nvidia and Amazon are not just rivals; they are partners. Despite Amazon's push to develop in-house chips, both companies have a significant stake in the AI boom. However, the benefits they stand to gain from this burgeoning market may not be equal. While Amazon dominates the cloud-computing services sector and expects to generate substantial AI revenue, Nvidia's stronghold lies in AI chips.
The key factor that could propel Nvidia past Amazon is their respective price-to-earnings (P/E) multiples. According to FactSet, Amazon currently trades at a P/E multiple of around 41, based on its projected earnings for the next twelve months. In contrast, Nvidia's P/E multiple stands at 26.
Nevertheless, that doesn't guarantee Nvidia's overtaking of Amazon. Market consensus suggests that while Wall Street analysts anticipate Nvidia shares to outpace Amazon's, the pace may not be sufficient to surpass Amazon's overall market valuation.
FactSet's survey reveals that the average target price for Nvidia is $663.75, representing a potential 25% increase and an estimated market valuation of approximately $1.64 trillion. On the other hand, Amazon's average target price is $182.39, signaling a 21% rise and a market valuation of $1.88 trillion.
During premarket trading, Amazon shares saw a modest increase of 0.2% to $151.67. Apple, the most valuable company in the United States, held steady, while Microsoft, the second-largest, experienced a 0.4% increase, and Alphabet, in third place, saw a 0.3% rise.
In conclusion, the battle for AI dominance between Nvidia and Amazon remains in progress. Both companies possess unique strengths and are poised to thrive in this ever-evolving landscape.