Nvidia's record results, a symbol of market concentration
With a market capitalization of over $4 trillion, Nvidia has become the world's most valuable company. This spectacular rise illustrates the growing concentration of markets around a handful of tech giants.
For the first time in history, a company has exceeded $4 trillion in market capitalization. That company is, of course, Nvidia. It crossed this threshold on July 9 and has been breaking records ever since. At yesterday's close, Nvidia was worth $4.18 trillion.
Apple and Tesla combined
And while Apple has long held the position of world's largest market capitalization, the iPhone maker's market cap is now "only" $3.1 trillion. Even when Tesla's market cap (approximately $1 trillion) is added, it is still below Nvidia's.
Beyond the battle over who is biggest, it is important to measure how significant Nvidia's size is in terms of global markets. This single stock now accounts for 3% of total market capitalization.
Source: Bloomberg
Another calculation by MarketScreener's macro research teams is also quite representative. Nvidia's market capitalization is higher than that of all CAC 40 companies combined with 36 DAX companies (all but the four largest DAX stocks).
Markets are becoming increasingly concentrated
However, this is nothing new. For many years now, large tech stocks have been gaining more and more weight in the indices. This is known as concentration and can also be explained by the fact that these few stocks – the so-called Magnificent Seven – also account for the lion's share of profits.
Concentration of S&P 500 index % of top 10 stocks in given indicator of S&P 500
R&D spend Market Cap. Free cash flow Sales
Source: JPMorgan
Is this situation healthy? No. But is it unjustified? No, not when you consider the profitability of these companies and their ability to consistently outperform the rest of the pack.
NVIDIA Corporation is the world leader in the design, development, and marketing of programmable graphics processors. The group also develops associated software. Net sales break down by family of products as follows:
- computing and networking solutions (89%): data center platforms and infrastructure, Ethernet interconnect solutions, high-performance computing solutions, platforms and solutions for autonomous and intelligent vehicles, solutions for enterprise artificial intelligence infrastructure, crypto-currency mining processors, embedded computer boards for robotics, teaching, learning and artificial intelligence development, etc.;
- graphics processors (11%): for PCs, game consoles, video game streaming platforms, workstations, etc. (GeForce, NVIDIA RTX, Quadro brands, etc.). The group also offers laptops, desktops, gaming computers, computer peripherals (monitors, mice, joysticks, remote controls, etc.), software for visual and virtual computing, platforms for automotive infotainment systems and cloud collaboration platforms.
Net sales break down by industry between data storage (88.3%), gaming (8.7%), professional visualization (1.4%), automotive (1.3%) and other (0.3%).
Net sales are distributed geographically as follows: the United States (46.9%), Singapore (18.2%), Taiwan (15.8%), China and Hong Kong (13.1%) and other (6%).
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