While Apple maintained its position as the world's largest company over the past decade, it hasn't held it as much lately. Currently, Microsoft holds the title, but after May 28, I think Nvidia (NVDA 0.74%) will take it over.
What's so important about May 28? That's when Nvidia reports its first-quarter fiscal-year 2026 results (ending around April 30), and I think there will be some great news in store for investors.
Image source: Nvidia.
The AI arms race is far from over
Not long ago, Nvidia wasn't even a $1 trillion company, but the massive demand for its best-in-class graphics processing units (GPUs) propelled the stock to new heights.
Thanks to their ability to process multiple calculations in parallel, GPUs have been widely used in the AI arms race. This effect can be further amplified by connecting multiple GPUs in clusters, creating an ultimate computing workhorse. Nvidia's GPUs and the products that support them far outpace the competition, which is why many estimate that Nvidia's market share in the data center GPU space is above 90%.
Over the past 12 months, Nvidia generated $115 billion in revenue from its data center division alone. One estimate pegged 2024's data center capital expenditure spending at around $400 billion, so it's a good estimate that about 30% of total data center costs go to Nvidia. That same estimate projected that data center capital expenditures will rise to $1 trillion by 2028, translating to just less than $300 billion in data center revenue should that projection come true.
Although Nvidia's data center revenue total may not reach that high, that projection illustrates that data centers are far from being built out. This supports general observations as well, as generative AI is popular, but it hasn't reached mainstream usage levels yet.
This opens the door for significant AI data center spending, from which Nvidia will benefit. This is backed up by what the AI hyperscalers have said during their Q1 reports, as these companies gave investors guidance for record capital expenditures. They've also mentioned that despite economic headwinds caused by tariffs, their buildout plans are full steam ahead.
This foreshadowing leads me to believe that Nvidia will post another excellent quarter and give strong guidance for Q2. Following earnings, the stock will likely jump up, surpassing Microsoft as the world's largest company. But what will it take to create that jump?
NASDAQ: NVDA
Key Data Points
Nvidia's stock recovered, but it's still reasonably priced for its growth
After the sharp recovery of the market over the past few weeks, Nvidia's stock is no longer at bargain valuation levels. However, it's still cheaper than where it spent most of 2024.
NVDA PE Ratio (Forward) data by YCharts
At 31 times forward earnings, the stock has a lot of growth priced into it. For Q1, Wall Street analysts project revenue growth of 66%, slightly above Nvidia management's growth projection of 65%. However, Nvidia has a track record of beating internal and external expectations, so don't be surprised if its growth rate is above 70%.
One area we know Nvidia's growth will suffer is earnings, as they had to take a $5.5 billion write-off due to export controls changing on chips meant for China. However, I think the investing community will understand why this occurred, and it shouldn't have too much of an effect on outlook, which is what the market will mostly focus on.
For Q2, Wall Street analysts project guidance for 54% growth. If Nvidia's expectations come in well above that, I think the stock will react positively, leading to Nvidia becoming the world's largest company on May 29. So, if you haven't bought shares of Nvidia yet, I think now is still an opportune time.
