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Time of India
2 days ago
- Business
- Time of India
Forget Nvidia's $4 trillion valuation! This tech company is set to cross $4.5 trillion market cap, thanks to its big AI bets
Nvidia has become the first company to cross the $4 trillion. But, there's another technology company that may hit $4.5 trillion! (AI image) Nvidia has seen a meteoric rise - becoming the first company in the world to have a market capitalization of over $4 trillion. In fact there are only five economies in the world that have a GDP of over $4 trillion as per IMF's 2025 projections. But even though Nvidia has become the first company to cross the $4 trillion capitalization mark, there's another technology company that may hit $4.5 trillion! According to Oppenheimer analysts quoted in a Motley Fool report, another AI giant is poised to join Nvidia in the $4 trillion valuation category and potentially reach $4.5 trillion within the next year. Currently, this particular stock presents a more favourable investment opportunity compared to Nvidia, the Oppenheimer analysts believe Nvidia's Rise: Is The Market Dominance Sustainable? Nvidia stands out as a big success story - its valuation has seen an over 10 times rise in the last three years. This remarkable growth stems from substantial investments in artificial intelligence (AI) infrastructure, where Nvidia's graphics processing units (GPUs) serve as essential components. However, Nvidia's leading position in the AI chip sector encounters challenges. Other GPU manufacturers are improving their price-performance ratios, whilst Nvidia's major hyperscale clients are increasingly utilising their own custom silicon designs for generative artificial intelligence (AI) applications. This could possibly impact the company's growth outlook. Nvidia is an AI chip industry leader, particularly in training hardware. Its superiority comes from advanced tech capabilities and its exclusive CUDA software platform. This creates big barriers for competitors to surmount in the semiconductor market, the Motley Fool report says. However, major clients such as Meta Platforms and Microsoft are actively seeking to reduce their dependence on Nvidia's AI training hardware, the report said. Meta is expanding its Meta Training and Inference Accelerator system across various generative AI applications. Their new chip aims to replace Nvidia processors in AI training for the Llama foundation model, whilst they already utilise their custom chips for certain AI inference operations. Microsoft harbors similar objectives with its Maia chips, although they have delayed their next-generation AI training chip launch to 2026, rather than releasing it this year. Such delays have previously affected other large-scale computing companies, including Meta, resulting in substantial Nvidia orders. Nevertheless, as these technology giants enhance their chip design capabilities, they could potentially reduce their reliance on Nvidia's processors substantially over time. Nvidia maintains a strong market position, particularly following the US government's decision to lift restrictions on H20 chip sales in China. The company is poised to see a robust earnings growth throughout the year, driven by Chinese market access and hyperscaler demand. However, what is noteworthy is that Nvidia's shares command a significant premium, trading at nearly 40 times projected earnings, the report noted. Given this elevated valuation and potential long-term challenges, the stock's growth rate might lag behind other major artificial intelligence enterprises. Which Company can Hit $4.5 Trillion Market Cap? Currently, only a select few organisations rival Nvidia's market presence. Among the exclusive group of companies valued above $1 trillion, merely three have achieved valuations exceeding $3 trillion, with Nvidia being one of them. Microsoft, valued at approximately $3.8 trillion presently, stands closest to Nvidia. Oppenheimer analysts project Microsoft could reach the $4 trillion milestone shortly. Their analysis sets a $600 price target for Microsoft shares, suggesting a potential market valuation of $4.5 trillion, representing a 19% increase from its value as of July 15. Oppenheimer's optimistic outlook comes from many factors: There is expectation of higher revenue growth from Microsoft's Azure cloud computing service. Azure has actually emerged as Microsoft's main growth driver. This is due to increasing computational requirements for AI development. Additionally, Microsoft's investment in OpenAI not only implies a significant Azure customer but also provides essential resources for the broader AI development community. The surge in demand has been remarkable. Despite Microsoft's substantial investment of $80 billion in capital expenditures, primarily directed towards data centre construction and equipment, the company reports that demand still exceeds supply. Nevertheless, Azure maintains its position as the fastest-growing platform amongst the three major public cloud services. Analysts' optimistic outlook on Microsoft stems largely from the prospects of Copilot Studio. Whilst they acknowledge modest interest in Microsoft 365's native AI assistant Copilot, they anticipate stronger performance from the customisable AI assistant platform, Copilot Studio. This development allows Microsoft to implement higher pricing for its enterprise software package whilst maintaining customer loyalty. The higher revenue can in turn be reinvested in Azure and share buyback programmes. This would potentially boost earnings per share via improved profits distributed across a lower share count. Microsoft shares currently trade at approximately 33 times forward earnings, reflecting a relatively high valuation. However, this multiple appears justified for a company that maintains leadership positions in both cloud computing and enterprise software sectors of the AI industry. Following news about potential reversal of US restrictions on chip exports to China, Oppenheimer analysts revised their Nvidia price target to $200 per share, suggesting a market capitalisation of $4.9 trillion. However, at current prices, Microsoft presents a more appealing investment opportunity, the report said. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Yahoo
10-02-2025
- Business
- Yahoo
Is Meta's $65 Billion Spending Spree a Good Idea? Here's What History Suggests.
Over the last couple of years, businesses across every industry sector have become overwhelmingly enamored with artificial intelligence (AI). In particular, graphics processing units have become all the rage given their advanced computing power -- which is needed to train generative AI programs such as large language models. At some point, you'd probably expect these investments to hit a peak or begin to plateau. After all, investors want to see a return on these massive infrastructure projects. Well, apparently there is still more money to be spent for some of AI's biggest players. For example, (NASDAQ: META) announced its capital expenditures (capex) could reach $65 billion in 2025, representing over 60% growth from last year. Much of that will go to AI infrastructure investments. Below, I'm going to detail what Meta's $60 billion to $65 billion AI-focused passion project entails. Moreover, I'll dig into what happened the last time the company went on a spending spree and what history suggests could happen to Meta shares this year. During the company's fourth-quarter earnings call on Jan. 29, Wall Street analysts peppered Meta's executive leadership with questions related to this year's capex roadmap. Meta CEO Mark Zuckerberg and CFO Susan Li provided a lot of details about the proposed multibillion-dollar infrastructure project. Li clarified the spending will be going to three main categories: servers, data centers, and networking equipment. This makes sense as Meta plans to double down on data center build-outs equipped with "large training clusters" of networking equipment. Specifically, Li mentioned the company will "further ramp adoption" of its custom Meta Training and Inference Accelerator chips designed in partnership with Broadcom. While this level of investment is par for the course among the tech industry's biggest companies, investors may want a refresher on what happened the last time the company poured cash into its vision for the future. Quick question: When was the last time you heard about the metaverse? A few years ago, you may recall virtual worlds and spatial computing were hot topics in the financial world. The metaverse was supposed to change how people interact, and it promised myriad breakthroughs in how businesses across all industries would visualize and build new products. Perhaps no other company bought into the idea of the metaverse as much as ... Meta Platforms. Up until Oct. 2021, the social media company was still known as Facebook. In 2022, Meta began investing aggressively in its Reality Labs business -- a segment featuring virtual reality headsets for gaming and entertainment. As the chart above shows, the company's capex increased significantly. This wouldn't be an issue on its own, but these investments took a major toll on Meta's profitability. Just look at the inverse relationship between the company's capex and earnings per share in 2022. The hit to earnings led investors to sour on Meta stock, sending shares down 64% that year. If you see the company's metaverse investments as a close parallel to its massive AI spending plan, history suggests the stock could be in trouble. However, there are some important details that explain why things may go differently this time around. First, 2022 was a tough year for most tech companies. Inflation peaked around 9%, and the Federal Reserve began raising interest rates to curb rising prices. As such, just about all types of businesses were penny pinching and operating under radically tight spending protocols. These dynamics impacted Meta's core business as its advertising revenue declined 1% in 2022. The combination of falling ad sales and rapidly rising costs from the metaverse drastically reduced the company's profitability as earnings per share fell 38% the same year. Another reason the AI initiative could be different than the metaverse is due to how Meta is spending its money. The company over-hired in the Reality Labs business, which led to a series of sizable layoffs to right size its cost structure. But for the new infrastructure spend, Meta's management noted the company is investing in areas to extend the useful life of its servers. In other words, Meta's $65 billion capex budget could yield a better return on investment down the road. It should become pretty clear this year if the company's capex spending is outpacing sales, profits, and cash flow. For the time being, the best way to approach an investment in Meta is to keep an eye out for earnings announcements and any management commentary regarding the push into AI. Before you buy stock in Meta Platforms, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Meta Platforms wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $795,728!* Now, it's worth noting Stock Advisor's total average return is 926% — a market-crushing outperformance compared to 177% for the S&P 500. Don't miss out on the latest top 10 list. Learn more » *Stock Advisor returns as of February 7, 2025 Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy. Is Meta's $65 Billion Spending Spree a Good Idea? Here's What History Suggests. was originally published by The Motley Fool Sign in to access your portfolio
