The S&P 500 retreated on Thursday 20th June 2024, having momentarily surpassed the 5500 for the first time ever, as Nvidia, a favourite stock with Wall Street investors, relinquished its earlier gains.
The S&P 500 index fell 0.25% to end at 5473. Earlier in the session, the S&P 500 gained around 0.34% to hit a new all-time high.
S&P 500 one day chart 20th June 2024
S&P 500 one day chart 20th June 2024
The Nasdaq Composite dropped 0.79% to finish at 17721. The Dow Jones Industrial Average (Dow) jumped around 299 points, to close at 39134.
Nvidia lost ground and handed the Market Cap crown back to Microsoft after briefly enjoying the accolade for just 2 days. At one point, Nvidia trimmed around $240 billion off its Market Cap as investors took profits.
Will Nvidia regain the crown in the coming weeks? Probably.
Nvidia, traditionally recognised within the gaming community for its graphics chips, has become the world’s most valuable publicly traded company.
On Tuesday 18th June 2024, Nvidia’s shares rose by 3.6%, increasing its market cap to $3.34 trillion and overtaking Microsoft, now valued at $3.32 trillion. Earlier in the month, Nvidia’s valuation reached $3 trillion for the first time, surpassing Apple.
Nvidia $3.34 trillion market cap
Nvidia $3.34 trillion market cap
So far this year, Nvidia’s shares have surged over 170% and saw further gains after announcing first-quarter earnings in May 2024. Since the close of 2022, the stock has increased more than ninefold, paralleling the rise of generative artificial intelligence.
Apple’s shares dropped by 1.1% on Tuesday, resulting in a market value of $3.29 trillion for the tech giant.
Nvidia commands roughly 80% of the market share for AI chips in data centres, a sector that has expanded rapidly as companies like OpenAI, Microsoft, Alphabet, Amazon, and Meta have competed to acquire the necessary processors for constructing AI models and managing growing workloads.
In the latest quarter, Nvidia’s data centre business saw a 427% increase in revenue from the previous year, reaching $22.6 billion and comprising approximately 86% of the company’s total sales.
Established in 1991, Nvidia initially focused on hardware, selling gaming chips for running 3D games. The company has also ventured into cryptocurrency mining chips and cloud gaming services.
However, in the last two years, Nvidia’s stock has soared as investors recognised its pivotal role in the AI boom, a trend that continues to accelerate. This surge has increased the net worth of co-founder and CEO Jensen Huang to an estimated $117 billion, ranking him as the 11th richest individual globally, according to Forbes.
But is the rise too fast and is it time for a share price valuation adjustment in its meteoric rise, to bring it back down to Earth?
Nvidia’s swift ascent is poised to prompt a major technology exchange-traded fund to acquire more than $10 billion in shares of the semiconductor maker, consequently reducing its shareholding in Apple.
The Technology Select Sector SPDR Fund (XLK), which will rebalance soon, is guided by an index that will adjust based on the market cap value at Friday’s close. According SPDR Americas Research, the recalibration will reportedly position Microsoft as the leading stock, followed by Nvidia, and then Apple.
Without caps, each of the three stocks would exceed a 20% weight in the index. However, the index’s diversification rules restrict the total weight that stocks constituting at least a 5% share of the fund can hold.
Consequently, it is anticipated that Microsoft and Nvidia will each approach a 21% weight, while Apple’s share is projected to drop to approximately 4.5%.
This news moved markets on 17th June 2024 and pushed the S&P 500 to a new all-time high. The Nasdaq100 index also relished the news reaching: 19902.75
The Nasdaq100 index also relished the news reaching: 19902.75
Nvidia share price 17th June 2024 – one year chart
While Nvidia continues to dominate the AI chip market headlines, Infineon, a German semiconductor company, is also making waves.
Infineon is capitalizing on the AI surge, aiming to generate billions in revenue through the sale of premium chips.
As AI applications proliferate, encompassing data centre servers and integrated chipsets for PCs and mobile devices, the demand for AI chips is skyrocketing. This trend has only one direction, and that is up.
Infineon is certainly one to watch – it may just become the next major player in the industry.
The S&P 500 reached a new high as Nvidia surpassed the $3 trillion mark for the first time, and the anticipation of an interest rate cut grew due to softer-than-expected job data.
S&P 500 all-time high as of 5th June 2024
S&P 500 all-time high as of 5th June 2024
Similarly, the Nasdaq 100 and Nasdaq Composite achieved new record highs
Nasdaq 100 as of 5th June 2024
Nasdaq Comp as of 5th June 2024
AI boom catapults Nvidia passed Apple’s market cap’ valuation
Nvidia’s shares have surged 24% following its impressive earnings report in May, in contrast to Apple’s shares, which have increased by only 5% this year amid a slowdown in sales growth in recent months.
Nvidia one year share price as of 5th June 2024
Nvidia one year share price as of 5th June 2024
Nvidia Market Cap at $3.01 trillion as of 5th June 2024
Kneron, a startup specializing in artificial intelligence chips, unveiled its latest products on Wednesday 4th June 2024.
The company aims to exploit the growing world-wide interest in AI and provide an alternative to industry heavyweights such as Nvidia and AMD.
The company, headquartered in Taiwan and supported by American semiconductor leader Qualcomm and major iPhone assembler Foxconn, introduced the KNEO 330, its second-generation ‘edge GPT’ server.
GPT, short for generative pre-trained transformer, is an AI algorithm trained on vast datasets capable of generating text and images, with OpenAI’s ChatGPT being the world leader right now.
Intel announced its new Xeon 6 processors at the Computex tech conference in Taiwan on Tuesday 4th June 2024.
This announcement coincides with the recent launches of new artificial intelligence chips by rivals Nvidia and AMD on Sunday and Monday 2nd and 3rd June 2024 – as they compete for dominance in the rapidly growing industry.
Intel is making efforts to catch up with Nvidia and AMD, having been relatively absent from the AI surge that led tech giants such as Meta, Microsoft, and Google to purchase a significant number of Nvidia chips.
This comes half a year after Intel’s release of its 5th Gen Intel Xeon processors for data centre workloads and a couple of months following the announcement of the Gaudi 3 processor for AI model training and deployment.
Intel also disclosed that the Gaudi 2 and Gaudi 3 AI accelerators are priced lower than those of its competitors.
Furthermore, Intel shared architectural details of its forthcoming Lunar Lake processors, aimed at expanding the AI PC category. These processors, slated for release in the third quarter, are set to rival Nvidia’s and AMD’s offerings tailored for AI PCs.
While Nvidia and AMD focus on chip design, Intel stands out by both designing and manufacturing its chips. Nevertheless, Intel’s foundry business has faced challenges, with its operating loss widening to $7 billion in 2023 compared to the previous year.
AMD announced new artificial intelligence chips on Monday 3rd June 2024, aiming to position itself as a leader in the market alongside competitors such as Nvidia and Intel.
“AI is our number one priority and we’re at the beginning of an incredibly exciting time for the industry as AI transforms virtually every business, improves our quality of life, and reshapes every part of the computing market,” chair and CEO Lisa Su reportedly commented during the Computex tech conference.
The company unveiled the Ryzen AI 300 series for next-generation AI laptops. The line is anticipated to compete directly with Intel’s upcoming Lunar Lake and Qualcomm’s Snapdragon X. And in partnership with Microsoft, these new AI chips will power laptops equipped with the tech giant’s AI chatbot Copilot.
AMD has unveiled the new Ryzen 9000 series for desktops, inferred as ‘the world’s fastest consumer PC processors’ for gaming and content creation.
The series is due for release in July 2024, following closely on the heels of AMD’s April announcement of new processors capable of running AI workloads – the Ryzen Pro 8040 for laptops and the Ryzen Pro 8000 for desktops.
Nvidia has revealed its latest generation of AI chips, coming just months after the release of its preceding model.
This rapid succession underscores the intense competition within the AI chip market and Nvidia’s relentless effort to maintain its leading position.
CEO Jensen Huang has now committed to unveiling new AI chip technology annually, accelerating the company’s prior biannual pace. The latest AI chip architecture, named ‘Rubin,’ is set to follow the ‘Blackwell’ model announced in March 2024, which is currently in production and anticipated to be delivered to customers the latter part of 2024.
Huang’s unveiling of the Rubin has seemingly hastened Nvidia’s already rapid AI chip development.
Nvidia has committed to launching new AI chip designs annually, a cadence Huang reportedly referred to as a ‘one-year rhythm‘ during his Sunday 2nd June 2024 announcement. Previously, the company was committed to updating its chips every two years. But such is the speed and fierce competition of AI development, that original decision has become quickly out-dated.
The swift transition from Blackwell to Rubin, taking less than three months, highlights the intense competition in the AI chip market and Nvidia’s race to maintain its leading position.
AMD and Intel are two major competitors playing catch-up in the AI race.
Nvidia’s shares surpassed $1,000 for the first time during extended trading on Wednesday 22nd May 2024, following the chip manufacturers report of fiscal first-quarter (Q1) earnings that exceeded analysts’ expectations.
Investors have been using Nvidia’s performance as a barometer for the AI industry’s growth, which has captivated the market over the past year. The robust results indicate that the demand for Nvidia’s AI chips continues to be strong. However, there may be an argument that it is time to take some profits from these massive gains. Can it continue its meteoric climb?
It was also announced that revenues from the upcoming next-generation AI chip, ‘Blackwell‘, are expected later in the year.
In extended trading, the stock increased by around 7%. Additionally, Nvidia announced a 10-for-1 stock split. Given the post-market activity, the shares are on track to reach a new high on Thursday 23rd May 2024.
Nvidia anticipates sales of $28 billion for the current quarter, surpassing Wall Street’s expectations of $26.61 billion sales, as reported – (Nvidia financial reports)
The company declared a net income of $14.88 billion, or $5.98 per share, a significant increase from $2.04 billion, or 82 cents per share, in the same period last year. (Nvidia financial reports)
Over the past year, Nvidia’s sales have surged, driven by purchases from tech giants like Google, Microsoft, Meta, Amazon, and OpenAI, which have invested billions in Nvidia’s GPUs. These high-end, expensive chips are essential for the development and deployment of artificial intelligence (AI) applications.
Nvidia’s primary business segment, data center sales, encompasses AI chips and other necessary components for operating large AI servers.
The revenue for Nvidia’s data centre sector soared over 400% compared to the previous year. This growth was attributed to the delivery of the company’s ‘Hopper’ graphics processors (GPU’s), including the H100 GPU.
It was also reported that Meta’s Lama 3, their newest large language model utilizing 24,000 H100 GPUs, as a notable income stream this quarter.
NVIDIA Corporation (NVDA) has experienced remarkable growth over the past decade.
Historical stock price trends
As of 10th May 2024, NVIDIA’s closing stock price stood at: $898.78
As of 10th May 2024, NVIDIA’s closing stock price stood at: $898.78
NVIDIA’s stock reached an all-time high of $950.02 on 25th March 2024. The 52-week high stands at $974.00, which is 9.7% higher than the current share price. Conversely, the 52-week low was $280.46, which is considerably below the current price.
Annual percentage changes
In 2024, the average stock price reached $763.29, marking a year-to-date rise of 79.30%.
In 2023, NVIDIA’s stock price experienced a remarkable surge of 239.02%.
Conversely, in 2022, the stock price witnessed a decline of 50.27%.
Throughout the past decade, the stock has undergone considerable volatility, exhibiting both notable gains and significant losses.
Focus
NVIDIA began as a pioneer in PC graphics and has since expanded its focus to artificial intelligence (AI) solutions. Its GPUs (graphics processing units) are pivotal in AI, high-performance computing (HPC), gaming, and virtual reality (VR) platforms.
The company’s parallel processing capabilities, powered by thousands of computing cores, are vital for executing deep learning algorithms. Additionally, NVIDIA is active in emerging markets such as robotics and autonomous vehicles.
Market position
NVIDIA holds a dominant position in the Data Centre, professional visualization, and gaming markets. Its success is bolstered by strategic partnerships with leading cloud service providers and server vendors.
Financial performance
NVIDIA’s revenue and profit have seen substantial growth over time. Its emphasis on AI and new technologies suggests a strong potential for further expansion. In summary, despite NVIDIA’s stock achieving impressive gains, it is still influenced by market trends and technological changes.
Its peak status hinges on multiple elements such as industry movements, competitive landscape, and upcoming innovations. Investors are advised to meticulously assess these factors when determining the stock’s future prospects.
Considering a long-term investment yet expecting a downturn, it might be prudent to realise some profits now, given the enormous 20,000% surge in stock value.
Arm, with a 90% holding by SoftBank, is reportedly set to establish an AI chip unit with the goal of developing a prototype by spring 2025.
This initiative is aimed at catching up with the booming AI market, currently dominated by Nvidia.
Arm, alongside competitors such as AMD, Intel, and Qualcomm, is accelerating efforts to gain position in the AI sector.
SoftBank is negotiating with contract manufacturers, including Taiwan’s TSMC, to produce the AI chips. Mass production is expected to commence in autumn 2025.
Arm’s shares have surged by nearly 45% this year, bringing its market capitalization to over $113 billion.
The chip designer based in the U.K., plans to create an AI chip unit to develop a prototype by spring 2025.
Discussions are reportedly ongoing with contract manufacturers like Taiwan’s TSMC for the production of the AI chips. It was reported that production is anticipated to start in fall 2025.
Arm is responsible for designing the core architecture for these chips. The company licences its designs to companies including Qualcomm and Nvidia and earning royalty fees from each sale. The company asserts that 99% of high-end smartphones utilize Arm technology.
Ambition
Established by Japanese billionaire Masayoshi Son, SoftBank is heavily investing in AI. The company has new plans to allocate $960 million by the following year to enhance its generative AI computing capabilities. In June 2023, Son expressed SoftBank’s ambition to occupy a leading role in the AI revolution.
Reportedly, SoftBank aims to establish AI data centres equipped with proprietary chips throughout the U.S., Europe, Asia, and the Middle East by 2026.
For the fiscal year concluding in March 2024, SoftBank recorded a 7.24 billion Japanese Yen ($4.6 billion) profit in its Vision Fund.
This was the first profitable year for the principal tech investment division since 2021.
UK chip designer Arm’s shares fell on Thursday 9th May 2024, subdued by revenue forecasts despite a strong sales quarter fueled by demand for AI applications.
Arm announced a 47% increase in fiscal Q4 revenue to $928 million on Wednesday.
This surge was propelled by its licensing business, which saw a 60% increase to $414 million for the quarter, attributed to several high-value licencing deals for AI chips.
Additionally, Arm’s royalty revenues rose 37% to $514 million year-over-year, thanks to the growing adoption of its new Armv9-based chips, which offer higher margins.
However, Arm’s revenue projection for 2025, estimated between $3.8 billion and $4.1 billion, did not meet investor expectations, with analysts anticipating $3.99 billion for the year.
What is Arm?
Contrary to chipmakers like Nvidia, which manufacture and market their own products, Arm creates the ‘architectures’ that form the foundation of chips.
These designs are then licenced to various chip manufacturers, including Qualcomm and Nvidia, with Arm earning royalties on each unit sold.
Originally founded in Cambridge, England, in 1990, Arm was an independent company listed in London until 2016, when it was acquired by Japanese tech investor SoftBank for $32 billion.
In September 2023, SoftBank listed Arm on the Nasdaq. Since its initial public offering, Arm’s share value has more than doubled, driven by the explosive demand for chips that power advanced generative AI applications, such as ChatGPT.
But this recent revenue forecast had a negative effect on its share price
Arm Holdings one year chart to 9th May 2024
The recent revenue forecast had a negative effect on its share price
Microsoft’s Q3 results surpassed estimates for both revenue and earnings.
But the revenue forecast for Q4 was less than anticipated, with the company reportedly projecting $64 billion, which is below the consensus of $64.5 billion – (only just).
Revenue: $61.86 vs. $60.80 billion expected
Earnings per share: $2.94 vs. $2.82 expected
Additionally, Microsoft is reportedly boosting its capital expenditures to acquire Nvidia graphics processing units, which are essential for training and operating artificial intelligence (AI) models.
Nvidia, manufacturer of one of the most advanced graphics processing units (GPUs), has significantly benefited from the artificial intelligence (AI) surge due to the high demand for its microchips.
The company’s shares have fallen 10% from their recent all-time high, which was over $950. On Tuesday, 9th April 2024, the stock closed at $853.54, but it saw a slight recovery on Wednesday 10th April 2024, to $870.39.
Nvidia Corporation share price off recent all time high
Nvidia Corporation share price off recent all time high
On Tuesday, 9th April 2024, Intel, a competitor in the chipmaking industry, introduced a new AI chip named Gaudi 3. This chip is designed to drive large language models and stands as a contender against Nvidia’s most sophisticated chips.
U.S. inflation data coming in higher than expected along with a climb in treasuries has led to doubts of a Fed rate cut anytime soon.
These concerns combined together, pushed Nvidia and some other tech stocks lower.
Intel’s stock dropped by 4% during extended trading on Tuesday 2nd April 2024, following the disclosure of long-anticipated financial details for its semiconductor manufacturing division, often referred to as the foundry business, in a filing with the SEC.
The company reportedly disclosed that its foundry business incurred an operating loss of $7 billion in 2023, against sales of $18.9 billion. This represents a greater loss compared to the $5.2 billion operating loss reported by Intel for its foundry business in 2022, which had sales of $27.5 billion.
This is the first time that Intel has disclosed revenue totals for its foundry business separately. Historically, Intel has both designed its own chips as well as its own manufacturing and reported microchip sales to investors.
Other American semiconductor companies such as Nvidia and AMD design their microchips but send them off to Asian factories such as Taiwan’s TSMC for manufacturing.
NVIDIA reportedly introduced about twenty or so new AI-driven tools tailored for healthcare at its 2024 GTC AI conference, securing partnerships with Johnson & Johnson and GE Healthcare for surgical and medical imaging applications.
For the AI chip pioneer, venturing into healthcare represents a decade-long development effort with substantial revenue possibilities.
The adoption of AI in drug discovery and research, a process that traditionally takes up to 12 years and costs billions, is accelerating rapidly.
The opportunities will be far reaching.
Nvidia one year chart
Dramatic price movement for Nvidia over a one-year period
Nvidia have announced a new generation of artificial intelligence chips and software for running AI models. It’s called: The Blackwell B200 GPU
Blackwell B200 GPU
The Blackwell B200 is the successor to Nvidia’s Hopper H100 and H200 GPUs.
It represents a massive generational leap in computational power.
AI Performance: The B200 GPU delivers 4 times the AI training performance and 30 times the inference performance compared to its predecessor.
Transistor Count: It packs an impressive 208 billion transistors, more than doubling the transistor count of the existing H100.
Memory: The B200 features 192GB of HBM3e memory with an impressive bandwidth of 8 TB/s.
Architecture: The Blackwell architecture takes over from H100/H200.
*Dual-Die Configuration: The B200 is not a single GPU in the traditional sense. Instead, it consists of two tightly coupled die, functioning as one unified CUDA GPU. These chips are linked via a 10 TB/s NV-HBI connection to ensure coherent operation.
*Dual-die packaging technology is used to pack two integrated circuit chips in one single package module. It doubles functionality levels.
Process Node: The B200 utilizes TSMC’s 4NP process node, a refined version of the 4N process used by Hopper H100 and Ada Lovelace architecture GPUs.
The Blackwell B200 is designed for data centres and AI workloads but will likely be available to expect consumer in the future, although these may differ significantly from the data centre model.
Grace Blackwell GB200 Superchip:
Nvidia’s GB200 Grace Blackwell Superchip, with two B200 graphics processors and one Arm-based central processor
This superchip pairs the Grace CPU architecture with the updated Blackwell GPU.
It’s another addition to Nvidia’s lineup, combining CPU and GPU power for advanced computing tasks.
Nvidia continues to push the boundaries of accelerated computing, and these new GPUs promise remarkable performance improvements for AI and other workloads.
Onwards and upwards for Nvidia and the advancement of AI.
As tech giant Nvidia soars on hype around artificial intelligence (AI), and as global stock indexes claim record highs, debate has grown about whether the stock market has entered a ‘bubble.’
An AI bubble of boom
We are reminded of the dotcom bubble where investment was rife in anything tech – so, are we now potentially facing a new tech bubble – an AI bubble of boom?
That’s generally seen as a period in which asset prices inflate rapidly, potentially beyond their core value; and risk crashing just as fast.
Other AI stocks are chasing the dream too adding to the hype. However, some are in the slow lane playing catch-up and this may suggest there is much, much more to come.
The likes of AMD, Intel, Amazon, OpenAI, Arm and a myriad of other tech companies big and small have much more AI to bring to the tech table.
Let’s use Nvidia as an example of a potential stock bubble
If we look at the valuation of Nvidia, justifiably it is actually very high, too high even – that’s the first sign of a potential problem, valuation. The second issue is investor positioning – whenever you have a market bubble, investors are very clustered or very concentrated, either in one market or in one sector as a whole.
Nvidia one year chart as of 29th February 2024. Price 791
Nvidia one year chart as of 29th February 2024. Price 791
Sectors
It doesn’t matter which markets you look at – the U.S., Europe or Asia markets – the problem is the same. We now have an historic valuation between the tech sector, the AI sub-sector of the tech sector, and the rest of the market.
Investors are very clustered in this tech sector. However, some leading commentators say of tech that this is not hype – this is real. It most probably is, for now, and with much more to come from the smaller tech and AI companies that have yet to show their true AI value. But all bubbles burst in the end.
Pop!
There is certainly plenty of room for AI to grow – it’s in its infancy – but the question is: ‘how and when will the bubble burst? Because, in my humble opinion, it most certainly will.
We may not see a dramatic market crash like 1999-2000 or 2007/2008, but an investor rotation out of areas of concentration into the broader market will likely happen.
If you look at the bubbles of 1999-2000, and then in 2007/2008, one key characteristic was investor leverage. And we had, whether it was retail investors or institutional investors, a very high level of leverage, and that was either through borrowings or it was through derivatives.
The AI tech boom has legs but there will almost inevitably be a rotation from AI to other sectors – that will then adjust the overvalued AI sector. And it could pullback quite hard.
The S&P 500 surged to a new all-time high on Thursday 22nd February 2024
Microchip maker Nvidia reported much stronger-than-expected quarterly results, lifting tech sector and markets higher.
S&P 500
The S&P 500 gained just over 2% to close at 5087, notching its best day since January 2023. The Nasdaq Composite advanced 2.96% for its best day since February 2023, closing at 16041 and ever closer to its all-time high.
Nasdaq
The tech-heavy index is very close now to its all-time closing high of 16,057.44.
Dow
The Dow Jones Industrial Average surged 456 points to surpass 39000 for the first time ever and close at a new high of 39069.
Shares of Nvidia climbed around 16% to an all-time high after the company said total revenue rose a massive 265% from a year ago.
Nvidia, which has become one of the largest U.S. companies by market capitalization, also forecast another stellar revenue gain for the current quarter.
The excitement surrounding artificial intelligence (AI) technology appears to show few signs of abating
The technology company at the heart of the AI chip boom reported its Q4 earnings after the stock market’s close on Wednesday 21st February 2024, beating expectations for both earnings and sales. The company’s total revenue is up 265% from a year ago.
Investors are looking to Nvidia’s latest quarterly earnings report to see whether the company’s meteoric growth can last.
Nvidia one year share price as at 22nd February 2024
Nvidia one year share price as at 22nd February 2024
AI chips
Nvidia makes powerful computer chips that power popular AI tools like OpenAI’s ChatGPT and Microsoft’s Copilot. High demand for those chips has propelled the company into the exclusive trillion-dollar club.
As of market close on 21st February 2024 the company’s market cap sat at $1.667 trillion, putting it behind Alphabet’s $1.779 trillion market cap. It’s also behind Microsoft and Apple, which hold market caps of $2.988 trillion and $2.819 trillion, respectively.
Nvidia’s stock price has been on an upward trajectory so far this year. Shares have gained by nearly 40% since the beginning of 2024. On top of that, they’ve soared by over 225% in the last 12 months.
Although short-term demand for Nvidia’s AI chips has been strong, major companies such as Microsoft and Meta have indicated interest in buying them from other companies.
If you had invested $1,000 in Nvidia
If you had invested $1,000 in Nvidia five, 10 or 24 years ago, here’s how much your investment would be worth now.
$1,000 in Nvidia five years ago, your investment would have increased by an eye-watering 1,015% and be worth around $17,542 as of 20th February 2024.
If you had invested $1,000 in Nvidia 10 years ago, your investment would have soared by about 22,340% and be worth around $148,226 as of 20th February 2024.
But, if you had invested $1,000 in Nvidia in January 1999, when Nvidia first went public, your investment would have grown by around 277,708% and be worth close to $2,784,065 as of 20th February 2024.
The Magnificent Seven, or MAMA ANT, is a term coined by Bank of America to describe the seven most dominant tech companies in the world
The Seven are: Microsoft, Amazon, Meta Platforms, Apple, Nvidia, Tesla, and Alphabet. These companies have not only led the tech sector in terms of innovation, growth, and profitability, but have also become some of the most valuable entities in the world by market capitalization.
Valuation at $15 trillion
Market capitalization, or market cap, is the total value of all the shares of a company that are traded on the stock market. It reflects the market’s perception of the company’s future prospects and earnings potential.
As of January 2023, the Magnificent Seven had a combined market cap of about $15 trillion, which was more than the gross domestic product (GDP) of almost every country in the world, except for the United States, China and Japan (just).
Magnificent Seven
The Magnificent Seven have achieved such a remarkable feat by leveraging their core competencies in various fields of technology, such as artificial intelligence (AI), cloud computing, social media, e-commerce, gaming, electric vehicles, and online advertising. They have also diversified their revenue streams by acquiring or developing new products and services, such as Activision Blizzard, AWS, Oculus, iPhone, GeForce, SpaceX, and YouTube. They have also benefited from the increased demand for digital solutions amid the Covid-19 pandemic, which accelerated the adoption of online platforms, remote work, and entertainment.
Challenges
However, the Magnificent Seven also face some challenges and risks that could threaten their dominance and valuation. These include increasing competition from other tech companies, especially from China, such as Alibaba, Tencent, Baidu, and Huawei.
They also face regulatory scrutiny and pressure from governments and consumers over issues such as antitrust, privacy, taxation, content moderation, and environmental impact. Furthermore, they may encounter technical difficulties, security breaches, or ethical dilemmas that could damage their reputation and customer trust.
Conclusion
In conclusion, the Magnificent Seven are the most powerful and influential tech companies in the world, and their market cap surpasses that of almost every country in the world.
List of 10 countries by stock market capitalization
List of 10 countries by stock market capitalisation
The meteoric rise in the profits and market capitalisations of the Magnificent 7 U.S. tech giants: Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla – outstrip those of all listed companies in almost every G20 country. Of the non-U.S. G20 countries, only China and Japan (and the latter, only just) have greater profits when their listed companies are combined.
They have achieved this by exploiting their competitive advantages in various domains of technology and expanding their offerings and markets. However, they also need to overcome some challenges and risks that could hamper their growth and value in the future.
A forced size reduction to stop the monopolising of market share could help tame these beasts too and open up fairer competition.
Should we worry?
Basically, yes, we should be concerned about the size and dominance of these companies.
This level of wealth and power concentrated in just a handful of companies has led some analysts to voice concerns over related risks in the U.S. and global stock markets.
Economists and stock market analysts have cautioned that the U.S. stock market is rivalling 2000 and 1929 in terms of being at its most concentrated in history.
Arm’s strong growth forecast has led investors to declare it an AI darling
Arm shares soared 29% on Monday, extending last week’s rally as investors continue to applaud the chipmaker’s better-than-expected third-quarter earnings and its position in the artificial intelligence boom.
Up 93% since 8th February 2024
Arm is now up 93% since it reported quarterly figures on 8th February 2024. There is no obvious reason for the 29% climb on Monday. The fear of missing out (FOMO) could be playing a part in the meteoric share price move.
The stock has almost tripled since Arm’s initial public offering in September 2023, closing at $148.97 and is now worth almost $153 billion, that’s a little more than $30 billion below Intel’s market cap.
Arm 1 year chart showing huge gain in February 2024
Arm 1 year chart showing huge gain in February 2024
AI demand fuels Arm’s success
Last week, Arm said it could double the price for its latest instruction set, which accounts for 15% of the company’s royalties, suggesting it can expand its margin and make more money off new chips. It also said it was breaking into new markets, such as cloud servers and automotive, due to AI demand.
Its royalty strength combined with Arm’s optimistic growth forecast has made the company the latest AI darling among investors, despite a higher earnings multiple than Nvidia or AMD.
U.S. microchip giant Advanced Micro Devices (AMD) is investing in AI PCs to take on the likes of Nvidia and Intel and Arm as the AI race gains momentum.
As the AI market expands so too will AI powered personal computer (PC). These are personal computers embedded with processors specifically designed to perform AI functions such as real-time language translation. Intel has already announced its AI powered chip for the PC.
Tech research firm Canalys in a December report said the boom in generative AI is expected to boost PC sales as consumers are seeking devices with AI features, predicting that 60% of the PCs shipped in 2027 will be AI-capable.
AI tech interest explodes
An explosion of interest in AI was sparked by the launch of ChatGPT in November 2022 as the chatbot went viral for its ability to generate human-like responses to users’ prompts.
Microsoft was quick to adopt the Technolgy and incorporate AI into its Bing search engine. Other companies such as Amazon, Alphabet (Google), Arm, Meta, Tesla and Apple are all heavily involved in AI development too.
The Magnificent Seven is a term coined to describe the seven most valuable and popularly owned tech companies in the U.S. stock market.
It was also a 1960’s movie…
The Seven
Apple (AAPL)
The world’s largest software company, known for its iPhone, iPad, Mac, Apple Watch, AirPods, and other devices, as well as its services such as iCloud, Apple Music, Apple TV+, and App Store.
Microsoft (MSFT)
The world’s largest software company, known for its Windows operating system, Azure cloud services, LinkedIn social media platform, Office professional software suite, and Xbox gaming brand.
Alphabet (GOOGL)
The parent company of Google, the world’s leading search engine, as well as other businesses such as YouTube, Google Cloud, Google Maps, Google Ads, and Waymo.
Amazon (AMZN)
The world’s largest online retailer, as well as a leading provider of cloud computing services through Amazon Web Services (AWS), and a major player in digital entertainment through Amazon Prime Video, Amazon Music, and Kindle.
Meta Platforms (META)
The former Facebook, the world’s largest social media network, as well as the owner of other popular platforms such as Instagram, WhatsApp, Messenger, and Oculus.
Nvidia (NVDA)
The world’s leading manufacturer of graphics processing units (GPUs), which are used for gaming, artificial intelligence, cloud computing, and cryptocurrency mining, as well as other products such as Nvidia Shield, GeForce Now, and Omniverse.
Tesla (TSLA)
The world’s most valuable automaker, known for its electric vehicles, battery products, solar panels, and self-driving technology, as well as its visionary founder and CEO, Elon Musk.
Market dominance
These seven companies are not only dominant in their respective fields, but also at the forefront of innovation and growth in the tech sector. They collectively make up some 30% of the S&P 500 index and more than half of the Nasdaq 100 index.
They have also delivered impressive returns for investors over the past five years, with Nvidia and Tesla leading the pack with more than 800% gains. The Magnificent Seven are often compared to the FAANG stocks, which include four of the seven companies, but exclude Microsoft, Nvidia, and Tesla, and include Netflix instead.
Some analysts suggest that the Magnificent Seven capture the current state and future potential of the tech industry. But is it now time to rotate out of tech into other areas that have been neglected. I wouldn’t be surprised to see the bull market charge on but with other ‘less’ loved companies leading the way.
It has been calculated that the combined market cap value of these seven companies is some $9 trillion.
Intel’s new chip will go head-to-head with Nvidia and AMD
Intel unveiled new computer microchips on Thursday 14th December 2023, including Gaudi3, a chip for generative AI software.
Intel also announced Core Ultra chips, designed for Windows laptops and PCs, and new fifth-generation Xeon server chips. Intel’s server and PC processors include specialized AI parts called NPUs that can be used to run AI programs faster.
AI race
AI models, like OpenAI’s ChatGPT, run on Nvidia GPUs in the cloud. It’s one reason Nvidia stock has been up nearly 230% year to date while Intel shares have risen 68%. And it’s why companies like AMD and, now Intel, have announced chips that they hope will attract AI companies away from Nvidia’s dominant position in the market.
Gaudi3 will compete with Nvidia’s H100, the main choice among companies that build huge factories of the chips to power AI applications, and AMD’s forthcoming MI300X, when it starts shipping to customers in 2024.
CEO Gelsinger
‘We’ve been seeing the excitement with generative AI, the star of the show for 2023,’ Intel CEO Pat Gelsinger reportedly said at a launch event in New York where he announced Gaudi3 along other chips focused on AI applications.
Intel upping the anti with its Gaudi AI chip. The AI PC to become the new AI start of 2024 and beyond!
‘We think the AI PC will be the star of the show for the upcoming year,’ Gelsinger added. And that’s where Intel’s new Core Ultra processors, also announced on Thursday, will come into play.
