Amazon and Nvidia: Giants in the Race for Market Capitalization

Market capitalization reflects the total value of a company's shares but says little about its performance or future prospects. Rather, it indicates the extent to which the market favors a company. New companies often have lower market capitalization because their growth potential is usually not yet fully realized. It is a mix of investor sentiment and proven success. Nvidia last year surpassed many long-standing standard companies with a 250% increase in its shares and now ranks at the top of the market capitalization leaderboard. The reason is the high demand for graphics processors that support the creation of generative artificial intelligence (AI), along with exceptional sales and profit increases. However, rising competition could lead to new dynamics. A significant customer of Nvidia is Amazon, which is also developing its own chips. Although Amazon generates higher revenue than Nvidia, Apple, and Microsoft, it ranks only fifth in terms of market value. While Nvidia and Apple are now close to $3.5 trillion, Amazon has reached nearly $2 trillion. However, there is potential for Amazon to surpass Nvidia in the next five years. Amazon's AI activities are gaining a lot of attention, but they are only a small part of the comprehensive Amazon ecosystem. More than a third of U.S. e-commerce is controlled by Amazon, generating substantial revenue. Amazon is expected not only to maintain but also to expand this leading position further through improvements in the logistics network and expansion of its product offerings. The area of generative AI is a new segment of Amazon Web Services (AWS), Amazon’s cloud computing business. AWS remains the leading provider in the cloud business, significantly boosting the company's operating profit. Through its own processors, AWS offers its customers cost-effective alternatives to Nvidia, without intending to compete directly with the market leader.