Is ๐ก๐๐ถ๐ฑ๐ถ๐ฎ ๐ ๐ฎ๐๐ธ๐ถ๐ป๐ด ๐๐ต๐ฒ ๐จ๐ป๐ฑ๐ฒ๐ฟ๐น๐๐ถ๐ป๐ด ๐ง๐ฟ๐ฒ๐ป๐ฑ?
Topic of the week:
Unless you've been living under a rock, you know or have at least heard about the stellar results Nvidia has achieved in recent years due to the boom and demand in AI. Whatโs not as broadly covered though, is how the wider semiconductor sector is performing, and is everything as rosy as it sounds?
Before we dive in, weโd like to share with you what weโve been reading lately from our fellow investing writers here on Substack - the Money Machine Newsletter:
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Nvidiaโs Market Cap Surge
Nvidiaโs importance has grown exponentially in recent years and especially since the beginning of 2024.
At the end of Q2 2024, the average market capitalization of more than 70 U.S. listed semiconductor companies was $65.3 billion. Excluding Nvidia, this figure drops to $40 billion. Just 5 years ago, in 2019, the difference between the average market capitalization of semiconductor companies with and without Nvidia was ~$1 billion, compared to a $25 billion difference last quarter.
In a League of its Own
In terms of revenue growth, Nvidia has blown out the water its industry peers with triple-digit year-over-year growth. However, the chip giantโs stellar performance seems to be masking the growth woes of the wider industry, as the median semiconductor company growth was negative for the last 5 quarters.
A Tide Lifts All Boats.. or Does it?
In Q2 2024, more than half (56%) of the +70 publicly traded U.S. semiconductor companies included in this analysis reported flat or negative year-over-year revenue growth.
Itโs evident that the rising tide in semiconductor demand and AI hasnโt benefited all boats, and Nvidia has undeniably been an exception to the rule.
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