Nvidia is set to reclaim a milestone as AI-chip demand shows no signs of slowing

Nvidia shares are up 3% midday Tuesday, potentially reclaiming the title of most valuable U.S. public company with a market cap of $3.45 trillion, surpassing Microsoft's $3.44 trillion valuation, driven by strong AI chip demand. Jefferies analysts added Nvidia to their highest-conviction buy list, citing its dominance in AI accelerators and the expected improvement in gross margins to the mid-70% range as the Blackwell AI platform ramps up, while UBS analysts anticipate Blackwell's profitability will aid margin recovery by year-end.

Analysis

Nvidia is on the verge of regaining its status as the most valuable U.S. public company, with its shares increasing by 3% midday Tuesday, elevating its market capitalization to $3.45 trillion, marginally surpassing Microsoft Corp.'s $3.44 trillion. This potential shift, which would mark Nvidia's first close at the top since January 24 and its first market cap lead over Microsoft since March 25, is primarily driven by sustained, robust demand for its AI chips. In contrast, Apple Inc., a former market cap leader, has experienced a roughly 19% decline in its stock value year-to-date in 2025, with its market capitalization currently at $3 trillion, partially attributed to U.S.-China tariff uncertainties. Analyst sentiment is notably positive for Nvidia; Jefferies added the stock to its highest-conviction buy list, citing its dominant position as an AI accelerator supplier in the burgeoning data-center market. A critical aspect of Nvidia's outlook is its gross margin trajectory. After reporting a fiscal first-quarter adjusted gross margin of 61% (or 71.3% excluding a $4.5 billion charge from the U.S. H20 chip ban for China), and guiding for a 72% adjusted gross margin in the current fiscal second quarter, both Jefferies and UBS analysts project a recovery to the mid-70% range by year-end, contingent on the successful ramp-up of its new Blackwell AI platform. Despite an $8 billion revenue headwind from China export restrictions on H20 chips—higher than the anticipated $5-6 billion—Nvidia's fiscal second-quarter revenue guidance of $45 billion (plus or minus 2%) met Wall Street expectations, signaling resilience. Future growth catalysts identified by Jefferies include the Blackwell Ultra ramp, persistent strength in networking solutions like NVLink and Spectrum-X, a seamless transition to the next-generation Rubin platform, and expanding opportunities in sovereign AI, underscored by investment commitments from nations like Saudi Arabia and the UAE, including a significant partnership with Saudi AI firm Humain for 18,000 chips over five years.

Key Decisions for Investors

• Investors should assess Nvidia's potential for continued leadership and growth in the AI sector, considering its strong market performance, positive analyst outlook, and sustained AI chip demand.
• Closely monitor the execution of the Blackwell AI platform ramp-up and its impact on achieving the targeted mid-70% gross margins by year-end, as this is a key catalyst highlighted by multiple analysts.
• Evaluate Nvidia's ability to navigate geopolitical headwinds, such as the China export restrictions on H20 chips, while capitalizing on new growth avenues like sovereign AI and maintaining strength in its networking segment.