The price of Nvidia shares has recorded a new small boom, thanks to which its performance turns out to be better even than that of Bitcoin, in the medium/short term.
In fact, thanks to the recent boom, it has become the company with the largest market capitalization in the world.
The boom of Nvidia on the stock market
Until 2020, the price of Nvidia shares on the stock market was growing steadily.
Starting from the boom of the financial markets in 2021, it began to soar. In 2021, however, many US stock titles recorded record booms.
The sensational boom in the price of Nvidia shares began in 2023.
Thanks to growth that seemed parabolic, the market capitalization of the NVDA stock first approached those of the largest companies in the world by market capitalization, such as Apple and Microsoft, and then as of yesterday, it even surpassed them.
#NVIDIA is now the world's largest company. Warning! Don't blink when watching this, or you'll miss it.
Any thoughts?
Music: Past Life Limbo by Dylan Sitts, Epidemic Sounds#Microsoft #Apple pic.twitter.com/oDrs0xBEX2
— James Eagle (@JamesEagle17) June 18, 2024
In reality, until December 2023, the growth was indeed remarkable and very rapid, but not very different from that of other technological stocks. It was simply a bit broader and faster.
Starting from January of this year, however, a new rally has been triggered, decidedly unusual, occurring while the competitors either did not rise, or rose only slightly.
Just think that since the beginning of the year, Nvidia’s stock on the market has recorded an incredible +180%, after a +240% recorded in 2023, while for example Apple’s stock since the beginning of the year has stopped at a modest +18%.
The comparison, however, must be made with the MSFT stock, given that until a few days ago it was precisely Microsoft that was the company with the largest market capitalization in the world.
MSFT in 2023 had recorded a good +63%, but during these first five and a half months of 2024, it had to settle for a +20%.
And so now Nvidia has reached a market capitalization of about 3.335 billion dollars, compared to Microsoft’s 3.317 and Apple’s 3.285. In fourth place, trailing, is Alphabet (formerly Google) with 2.171, and in fifth place is Amazon with less than 2.000 billion.
The comparison between the price of Nvidia shares and Bitcoin
During 2023 the price of Bitcoin increased by 153%, which is less than Nvidia’s +240%.
But it is in 2024 that the difference appears more marked. Until today, in fact, BTC has stopped at +50%, even though just before mid-March it had risen to +63% since the beginning of the year, but these are still significantly lower percentages than the +180% of the NVDA stock.
Furthermore, in 2022 BTC had recorded a loss of 60%, while Nvidia had stopped at -51%.
To return to Bitcoin performance better than those of Nvidia, we need to go back to the 2020/2021 biennium, when BTC made a sensational +420% cumulative, while NVDA stopped at +410%. However, the difference is minimal.
Taking the four-year period 2020/2024, and obviously stopping at yesterday’s data, Bitcoin is at +710% since the end of 2019, while Nvidia at this moment is at +2,200%.
Among other things, from the beginning of 2016 to the end of 2019, the NVDA stock had already marked an excellent +330%, even though it was a lower percentage than the +770% of BTC, but taking the cumulative gains from the beginning of 2016 to today, Nvidia skyrockets to an impressive +19,900%. In this case, however, Bitcoin does better, with a +25,000%.
Risk of a bubble?
The parabolic growth of Nvidia’s stock price over the past year and a half (especially since October 2022) raises suspicions that a genuine speculative bubble may have inflated around this stock.
For example, from October 2020 to November 2021, in just over a year, the price of Bitcoin rose by 470%, only to then retrace by 75% in the following twelve months. It is true that from the beginning of 2023 it started to rise again, but the one in 2021 was evidently a temporary speculative bubble that burst during the following year.
The price of Nvidia shares starting from November 2022 has grown by more than 1,000% in about a year and a half.
To many, this seems like a temporary speculative bubble, but unlike Bitcoin, behind the boom of Nvidia, there is a very specific economic reason.
In fact, the company is the largest producer in the world of chips for artificial intelligence, and thanks to the boom that AI has been experiencing for some time, its sales have skyrocketed.
Just observe the chart of the Price-to-Earnings ratio to understand that it is not merely an inconsistent temporary speculative bubble.
If the P/E ratio was about 2.1 points in 2019, it has now risen only to 10.3. Furthermore, already in 2021, it had risen above 7 points, and the peak was in April of last year at 15. So paradoxically, in the last twelve months, it has decreased.
For example, the Microsoft stock at this moment has a P/E ratio of even 38.5 points, and the minimum peak of recent years occurred in 2022 when it had dropped to 25.
Apple more or less is at those levels, with 33 points of current P/E ratio, and with a minimum peak of the last few just below 22 points at the end of 2022.
So given Nvidia’s amazing economic performance, especially in terms of profits, at this moment the price of its shares would not seem overestimated.