Nvidia: Will the chipmaker regain its market capitalization leadership amid antitrust scrutiny?

• Nvidia briefly held the title of the world’s most valuable company but lost ground to tech giants like Microsoft and Apple.
• The chipmaker faces antitrust investigations in Europe and potential fines for its dominant market share.
• Despite the challenges, analysts remain optimistic, pointing to Nvidia’s strong financial results and future potential.
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Nvidia’s (NASDAQ:) meteoric rise into 2024 hasn’t been without its bumps. After a brief dip in April, the chipmaker surged to become the world’s most valuable company by market capitalization on June 18.

But his reign was short-lived. Since then, Nvidia has stumbled, lagging behind tech giants Microsoft (NASDAQ:) and Apple (NASDAQ:) in market capitalization.

Source: Investing.com

CEO Jensen Huang’s company now faces the challenge of regaining lost ground. Can Nvidia reclaim the market cap crown?

Nvidia Faces Antitrust Tensions in Europe

France has thwarted Nvidia’s plans by launching antitrust investigations, echoing the challenges faced by tech giants like Apple, Microsoft and Meta (NASDAQ:).

European authorities are concerned about Nvidia’s dominant position in the graphics card (GPU) market, where the company has an 84% market share compared to competitors like Intel (NASDAQ:) and AMD (NASDAQ:) . Here’s the catch: Nvidia’s GPUs are currently an option for running generative AI systems, a technology with huge potential for the future.

This situation is a double-edged sword. While Nvidia offers customers a superior product, it raises suspicions of regulators. Violating European antitrust rules can result in a hefty fine – up to 10% of annual global turnover. Based on Nvidia’s revenue in 2023, this means a potential fine of $6 billion.

The numbers confirm Nvidia’s meteoric rise

Nvidia’s exceptional numbers underscore its status as the undisputed leader in its most important industry. The company reported $60.9 billion in revenue in 2023, up 125.9% year-over-year, and posted profits of $44.3 billion. This remarkable growth underscores Nvidia’s strategic positioning and market dominance.

Nvidia’s meteoric rise contrasts sharply with the tech boom that catapulted Cisco (NASDAQ:) to fame in 2000, a period that ultimately led to the dot-com bubble bursting. Unlike the hype-driven growth that caused Cisco to lose 80% of its value, Nvidia’s rise is rooted in tangible results and industry innovation. Originally known mostly to gaming enthusiasts, Nvidia has gained widespread recognition for solid results and financial success, not just its brand.

Analysts are betting on Nvidia

Analysts are bullish on Nvidia’s future. Morgan Stanley recently raised its price target on the stock from $116 to $144 per share, which represents a 17.4% increase from the July 2 closing price of $122.67. Morgan Stanley’s “overweight” rating is shared by many market experts who consider Nvidia stock a strong buy.

Nvidia’s steady growth and strong financial position continue to inspire investor confidence, strengthening its position as a key player in the technology sector.

Source: Investing.com: Data as of July 3, 2024.

Analysts surveyed by InvestingPro set an average price target for Nvidia shares at $132.34 per share, which represents a 7.88% increase from the price on July 2. As many as 51 experts rated the stock as a Buy, 4 as a Hold, and none recommend selling the stock.

Nvidia: Fairly Priced, But Will It Maintain Such Rapid Growth?

InvestingPro’s Fair Value analysis, based on 13 investment models, suggests that Nvidia’s current price may already reflect its intrinsic value. The model predicts a potential downside of 6.6%. However, this metric is often updated with new data, and the current reading could be a sign that the company’s strong fundamentals justify its massive $3 trillion market cap.

Source: InvestingPro

In simple terms, Nvidia isn’t necessarily overvalued based on Fair Value analysis. But after such a rapid rise, it’s natural for the stock to regroup for the next leg of growth.

The positive outlook is supported by all the indicators that indicate Nvidia’s excellent financial condition. The company boasts a Piotroski score of 9, the highest possible financial strength rating.

The biggest challenge: meeting success

Perhaps the biggest uncertainty surrounding Nvidia is its explosive growth. Nvidia accounted for a staggering 30% of the company’s profits this year, according to Chris Metcalfe, chief investment officer at IBOSS Asset Management. In fact, Nvidia’s biggest hurdle may not be French regulators, but rather exceeding the incredibly high expectations the company has set for itself with its phenomenal performance.

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Reservation: This article has been written for informational purposes only; it does not constitute an incentive, offer, advice, advice or recommendation to invest, as such it is not intended to encourage the purchase of assets in any way. I would like to remind you that each type of asset is evaluated from many perspectives and is highly risky, and therefore each investment decision and the associated risk remain on the investor’s side.