Nvidia (NASDAQ:NVDA) has become the number one company by market valuation and can now become “number one,” Truist Securities analysts said in a note released Wednesday.
On June 18, Nvidia’s market capitalization soared to $3.34 trillion, surpassing Microsoft (NASDAQ:MSFT) as the world’s most valuable public company. However, shares of the chipmaker then fell for several consecutive sessions, losing the top spot.
“We viewed that even if fundamentals cooperate, the stock’s upside could be limited due to business and technical challenges related to NVDA’s No. 1 market cap position,” Truist analysts wrote.
However, the company said its comprehensive analysis of the data indicates that “becoming the largest company by market capitalization does not appear to systematically undermine future investment returns.”
Truist evaluated the investment returns and valuations of stocks that have achieved the largest market capitalizations over the past 26 years. These stocks include Microsoft, Cisco (NASDAQ: CSCO), ExxonMobil (NYSE: XOM), Apple (NASDAQ: AAPL), and Amazon (NASDAQ: AMZN).
The analysis found that most of these stocks underperformed the S&P 500 index over short-term periods of one week, one month and three months after their initial rise to the top market cap position. However, over the longer term, the stocks generally outperformed the S&P 500 over one-year, three-year and five-year periods, the investment bank noted.
Overall, analysts continue to view NVDA as the top choice for investing in the AI space. Citing recent feedback from industry contacts, including component buyers and sellers, they note that there is continued and growing demand for Nvidia’s GPU systems. While Blackwell systems are particularly popular, Hopper systems are also well received.
In this context, the investment bank raised its price target on NVDA shares from $128 to $140.
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