Nvidia Was (Briefly) Bigger Than Amazon: How to Invest Now

Nvidia stock (NASDAQ:NVDA) passed Amazon (NASDAQ:AMZN) in market cap to become the fourth most-valued company in the United States this week.

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Just when investors may have thought that Nvidia (NASDAQ:NVDA) couldn’t do anything more, Nvidia stock managed to surpass Amazon (NASDAQ:AMZN) and its market capitalization this week.

It brings to light the continued focus not only on tech stocks, but also heavy investment in artificial intelligence (AI). Yet after passing Amazon stock, Nvidia stock shrank back. So should investors be watching for another pass? And if so, is the stock now a buy?

What happened

Nvidia stock continued to feel the heat as the company saw shares jump ahead of earnings. This helped catapult the chipmaker past Amazon stock’s market cap. The stock became the fourth most-valuable company in the United States even before earnings came in, and more growth is on the way.

The climb at first was brief, but seemed to surge back with Nvidia stock holding around US$1.8 trillion market cap, compared to Amazon at US$1.77 trillion. It marks the latest milestone for the chipmaker after an enormous rally over the last year.

The thing is, if you’re wondering whether the tech stock will drop, analysts aren’t so sure. Nvidia stock may seem overvalued, and it very well might be. In fact, there is certainly risk given the momentum in share price. However, there are a few other points to consider as well.

AI demand

There might be an AI bubble, certainly. However, the AI demand is there, and demand for these graphic processing units (GPU) created by Nvidia stock aren’t going away. The stock has been on a tear year to date, as shares have climbed almost 50% since the beginning of 2024.

The company’s chips and data centres for complex computing tasks continue to see high demand. Especially as AI grows in every type of company. While Amazon stock has also seen high demand, with shares climbing as well, it cannot keep up with the demand seen by the stock.

And this has all happened before earnings for Nvidia stock have even come out. It seems key that the company will need to keep up momentum by providing forward looking guidance that should beat estimates. Should it achieve this, the company is likely to see another spike in share price.

Not immune

If you think, however, that Nvidia stock is immune to macro issues, think again. The stock did see a fall in share price this week after consumer price index (CPI) data in the United States came in higher than originally thought. January inflation data showed CPI rose 0.3%, whereas economists thought there would be a 0.2% rise.

But chief executive officer (CEO) for Nvidia Jensen Huang also addressed other macro issues. And they belongs to AI infrastructure. That infrastructure is growing, but doesn’t need the necessary infrastructure like, say, the internet. Right now, AI is merely piggybacking on it. So the same opportunity for growth is available, though for a lower price.

The CEO urged countries and companies to hop on by taking the initiative to “activate your industry, build the infrastructure, as fast as you can.” And with earnings right around the corner, investors should certainly watch for how this growth will play out in the year and indeed years to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.

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