Nvidia Sets to Become First US Chipmaker Valuing Over USD 1 Trillion

Nvidia Corp (NVDA.O) is near becoming the first U.S. chipmaker to breach $1 trillion in market capitalization, boosted by demand for processors that accelerate artificial intelligence (AI) training and development. The gaming and AI chip company’s shares rose as much as 26% in after-hours trading Thursday, close to the record valuation of $998 billion set by Apple Inc (AAPL.O).

Nvidia’s stellar revenue forecast, which blew away Wall Street expectations by more than 50%, was the latest in a string of successes that have sent the stock on an epic rally this year. The San Jose, California-based company, which also makes graphics processing units (GPUs) used in video games, is now the world’s leading supplier of AI chips that transform how computers work.

Its products are in high demand from data centers, where they help process vast volumes of complex business and financial transactions. They are also being used by companies such as Alphabet Inc (GOOGL.O) and Microsoft Corp (MSFT.O) to train generative AI systems, which learn from data and create their algorithms. The technology is expected to transform healthcare, finance, and transportation industries.

Shares in Nvidia, listed on the New York Stock Exchange and trades internationally, have soared 235% since its two-year low hit last October. That is the best return of any S&P 500 stock over that period and has helped to push the Philadelphia Semiconductor Index to its highest level in more than a year.

Nvidia has benefited from a tech resurgence driven by an interest in AI, which is expected to be a $45 trillion global industry by 2035. The company’s market cap is also boosted by its strong position in the GPU sector, which accounts for about 60% of its sales. The other primary segment is automotive and data center products, which account for the rest of its sales.

A trillion-dollar valuation is an elusive milestone that only a few public companies have reached. The list includes Apple, Amazon.com Inc (AMZN.O), Google parent Alphabet, Microsoft, and Saudi Arabia’s state-owned oil firm Aramco.

Investors’ appetite for Nvidia’s growth story is likely to continue, particularly given its dominant position in AI chips and its strong earnings this fiscal year. However, Nvidia’s price-to-earnings ratio is still elevated, with analysts predicting that the company will need to keep delivering significant profit gains for some time before it can justify its valuation. Moreover, the company may be at a disadvantage regarding rivals who are more focused on designing microprocessors that can run AI programs faster than current ones. Intel Corp (INTC.O) and Advanced Micro Devices Inc (AMD.O) are its nearest competitors. However, the latter two are in the midst of a costly upgrade program. As a result, they are working on introducing new models of their existing microprocessors that will run AI more efficiently.


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