Nvidia’s market value closed on Friday above USD2 trillion for the first time, with enthusiasm about the prospects of artificial intelligence fuelling an eighth straight week of gains for the chipmaker’s shares.
Apple, Microsoft and Google-parent Alphabet are the other US-listed companies to have reached intraday market values of USD2tn, but only the former two have reached the end of a trading day with valuations above that threshold.
Nvidia shares rose 4 per cent on Friday, giving it a valuation of about USD 2.05tn. Its share price has now climbed 66 per cent since the start of 2024, or about $830bn in dollar terms. That followed a more than 230 per cent increase in 2023, as the company repeatedly blasted through analyst and investor forecasts.
In its most recent financial update last month, Nvidia reported a 265 per cent year-on-year increase in revenues, and chief executive Jensen Huang declared that AI had “hit the tipping point” with surging demand “across companies, industries and nations”
The tech group added USD 277bn in market capitalisation on the day after the results, a record for a US-listed company.
“Nvidia has an almost monopoly position,” said Tim Murray, multi-asset strategist at T Rowe Price “because the chips they make are the most essential tools to [AI].”
Nvidia’s latest earnings report, coupled with broader enthusiasm about the potential of AI technology, have helped to fuel a wider rally across global stock markets — with Wall Street’s S&P 500 hitting multiple new records and the tech-heavy Nasdaq Composite surpassing levels seen in 2021 to hit a peak on Friday.
The chipmaker has single-handedly driven more than a quarter of the year to date gains in the S&P 500, directly lifting the index by 96 points even before considering the broader effect it has had on investor sentiment.
“Nvidia’s earnings were always going to be this barometer of ‘what’s the demand for AI chips’,” said Murray.
This year’s dramatic ascent of Nvidia’s shares — and those of other tech stocks riding the wave of AI enthusiasm — has sparked debate over whether the AI boom may be approaching “bubble” territory.
“We’re in a period where — with AI — there’s a lot of excitement and we’ve probably got some time before we really have to see it proven,” said Murray. “There’s going to be a period eventually where the companies that are spending on AI need to realise some return on investment.”
“You’ve certainly got some time before there’s this moment of truth for the AI craze,” he added.
Zehrid Osmani, a portfolio manager at Martin Currie with a large investment in Nvidia, said many stocks had been rallying based only on the hope that AI enthusiasm will lead to future earnings, but Nvidia’s strength in graphics processing units made it “one of the stocks that is genuinely monetising”.
“Yes, in due course there could be more competition, but if you look at the scale of their [research and development] spending . . . we believe they should be able to keep their technological edge,” he said.
For Kristina Hooper, global chief markets strategist at Invesco, “Nvidia has captured imagination” while providing “some real underpinning to those imaginations and that excitement”.
The late 1990s was “a very similar time period for the stock market”, Hooper added, “in that there was a lot of excitement over technology.” However, “there wasn’t that fundamental underpinning — there weren’t real earnings, there weren’t solid cash flows”.
“It was really very much excitement . . . Sizzle without steak,” she said.
“This time around, there’s sizzle — but there’s also steak.”
