Nvidia has achieved a mammoth milestone by becoming the first chipmaker to reach a market valuation of over $1 trillion.
On par with Alphabet
The company saw a 4.2% increase in its share price during early trading on Tuesday, leading to its valuation crossing the $1 trillion mark.
The highest price target values the company at about $1.6 trillion, on par with Google-parent Alphabet.
Taiwan Semiconductor Manufacturing Co Ltd is the next largest chipmaker globally, valued at about $535 billion.
Part of trillion-dollar club
Meta Platforms Inc, valued at about $670 billion as of last close, clinched the trillion-dollar market capitalization milestone in 2021, while Apple Inc, Alphabet Inc, Microsoft Corp and Amazon.com Inc are the other U.S. companies that are part of the club.
To sum up Nvidia’s achievement, “Technical traders and AI mania have pushed Nvidia toward the $1 trillion cap and it is not inexpensive,” Argus Research analyst Jim Kelleher said.
Nvidia’s rise in fortune can be credited to investors betting heavily into the company which has quickly become one of the biggest winners of the AI boom.
Shift in focus to AI
Also to credit is the trend of companies big and small racing to add generative artificial intelligence tools to their products.
Big Tech companies have shifted focus to AI, hoping the technology will attract demand.
For instance, OpenAI-owned ChatGPT’s rapid success has prompted tech giants such as Alphabet and Microsoft to make the most of generative AI.
The computers that power generative AI run on powerful chips called graphics processing units (GPUs) – of which 80% are produced by Nvidia, according to analysts.
Pandemic impact
Business also took off during the pandemic when gaming became a huge market segment and tech such as cloud and crypto used Nvidia’s chips for mining coins.
CEO Jensen Huang bet on AI is expected to fuel growth in the coming months.
The last quarterly earnings report from Nvidia noted over $2 billion in profit in three months.
The stock’s value has tripled in less than eight months, reflecting the surge in interest in artificial intelligence following rapid advances in generative AI.
Word of caution
Despite the tremendous valuation, analysts believe there is still room for growth since generative AI technology is still at a nascent stage with wide adoption expected in the years to come.
“Given the valuation is well above the long-term average, there will be significant pressure to deliver high growth on a consistent basis … there could be volatility in its share price to come,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.
