American multinational technology company, Nvidia became the world’s first chipmaker and the 6th company in the world to hit the $1 trillion dollar market cap. Nvidia is entering into the trillion dollar club that has Apple, Amazon, Google, Microsoft, and Saudi Aramco.
It has become the world’s biggest maker of the specialized chips needed to power a new generation of AI products, surpassing the Advanced Micro Devices Inc. and Intel Corp.
From the past eight months, the stock’s value has tripled that is reflecting the surge in interest in Artificial Intelligence (AI) following rapid advances in generative AI.
Since October, Nvidia has gained about 200%, far outpacing any other member of the broad-market S&P 500 index. The latest surge furthers a rally from last week, which was jump-started by a revenue forecast that surpassed the mean Wall Street estimate by more than 50%.
Its shares closed 3% higher at $401.11 on 31st May, just a hair’s breadth away from the $1 trillion valuation mark after hitting that level in intraday trading. Just four other U.S. companies currently have a valuation of more than $1 trillion – Apple, Alphabet, Microsoft and Amazon, reported by Reuters.
The highest price target values the company at about $1.6 trillion, on par with Google-parent Alphabet. Nvidia’s forward price-to-earnings multiple, a common benchmark for valuing stocks, is 47.23. The figure is significantly above that of peers Qualcomm and Intel and also tops the sector median of 18.09, according to Refinitiv data.
Shifting Focus to AI
Big Tech companies are shifting their focus to artificial intelligence, hoping that AI technology will attract demand. The computers that power generative AI run on graphics processing units (GPUs), the powerful chips, of which 80% are produced by Nvidia, according to analysts.
OpenAI-owned ChatGPT’s rapid success has prompted tech giants such as Alphabet and Microsoft to make the most of generative AI, as per Reuters report.
Nvidia, led by CEO Jensen Huang, has pivoted to the data centre market over the last few years after years as a powerhouse in videogame chips.
The chipmaker’s business rapidly expanded during the pandemic when gaming took off, cloud adoption surged and crypto enthusiasts turned to its chips for mining coins. Huang said that AI is expected to fuel growth in the coming months. Despite the sky-high valuation, analysts believe Nvidia’s AI chips business has room for growth as generative AI technology is still at a nascent stage with wide adoption expected in the years to come.
