Following its strong earnings report last week, Nvidia (NASDAQ:NVDA) briefly joined the elite club of $2 trillion companies, propelled by its soaring stock price which surpassed $800, making it the most expensive stock among the “Magnificent 7.”
The remarkable rally in Nvidia’s stock now raises the question of whether it could eventually surpass even the largest U.S. companies. Currently, only Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) boast market caps larger than Nvidia’s, having overtaken both Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG) in size.
So, what’s behind Nvidia’s soaring stock price, and could it realistically become the biggest U.S. company?
Reasons for Nvidia’s High Stock Price
Nvidia’s stock price surge can largely be attributed to the robust momentum in artificial intelligence (AI) driving its performance over the past year. With a 61% increase this year and a staggering 240% rise in 2023, the stock has seen substantial growth, climbing 481% over the last three years, surpassing its pre-split levels in 2021.
The company’s dominant position as a supplier of AI chips has fueled a significant rerating since the beginning of 2023. Despite some market skepticism, Nvidia’s stock performance is supported by strong financials.
Nvidia’s Forecast and Financial Performance
Nvidia anticipates revenues of $24 billion for its fiscal Q1 2025, with analysts projecting revenues exceeding $100 billion for this fiscal year and $130 billion for the next. These figures represent a substantial increase compared to the company’s revenues of just under $11 billion in fiscal 2020.
Over the past four years, Nvidia’s revenues have multiplied six-fold, accompanied by even higher profit growth. In a market where many other growth stories appear less promising, Nvidia stands out with prospects of robust double-digit revenue growth and a proven track record of execution.
Future Prospects and Market Sentiment
Despite the significant rise in Nvidia’s stock price, some metrics suggest that its valuation remains reasonable. With a next 12-month price-to-earnings multiple of 32.1x, Nvidia’s valuation appears far from stretched compared to its peers.
Wall Street analysts remain bullish on Nvidia, with a consensus rating of “Strong Buy” and multiple upward revisions to target prices following the recent earnings report. While some concerns exist, such as a potential slowing in revenue growth, overall sentiment remains positive.
Could Nvidia Become the World’s Largest Company?
With a new Street-high target price of $1,400 implying a market cap of $3.5 trillion, Nvidia could potentially surpass Microsoft as the largest U.S. company. While this may have seemed unlikely a few years ago, it’s now within the realm of possibility.
Historically, the largest U.S. companies have evolved based on financial performance and market sentiments. Nvidia’s momentum and positive market sentiment suggest that it could indeed become the biggest company in the future.
Valuation Concerns and Long-Term Outlook
While Nvidia’s stock has significant momentum, some market observers, including valuation expert Ashwath Damodaran, believe that it may be overvalued. However, for investors focused on growth, Nvidia represents a compelling long-term investment opportunity with the potential to become the largest company someday.
In summary, Nvidia’s stellar performance and strong fundamentals position it as a frontrunner in the race to become the biggest U.S. company, signaling a promising future for the semiconductor giant.
Featured Image: Megapixl
Author Faith Yakubu 
