Nvidia Makes Momentous Leap: Entering the Illustrious $1 Trillion Valuation Club

Updated: 31 May 2023

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The prominent chipmaker Nvidia has reached a significant milestone by entering the exclusive $1 trillion valuation club.

Nvidia Joins $1 Trillion Valuation Club in Historic Achievement

Nvidia Corp. (NVDA.O) momentarily achieved a notable milestone on Tuesday. The company briefly entered the esteemed league of U.S. companies with a market value of $1 trillion. Investor interest in Nvidia has surged because of its role as a major beneficiary of the AI revolution.

NVIDIA just officially joined the $1 trillion market cap exclusive club!

— Alf (@MacroAlf) May 30, 2023

In under eight months, Nvidia’s stock has tripled in value, highlighting the escalating enthusiasm surrounding artificial intelligence. This significant surge can be attributed to the remarkable advancements in generative AI. Furthermore, it has given life to conversations and creative content generation, including jokes and poetry.

Since October, Nvidia’s stock has witnessed an astounding surge of approximately 200%. As a result, it has surpassed the performance of all other constituents in the S&P 500 index. The rally has boosted Nvidia’s valuation beyond its peers and sparked discussions about the stock being undervalued amid the AI boom.

On Tuesday, the company’s shares concluded trading at $401.11, marking a 3% increase and inching remarkably close to the coveted $1 trillion valuation mark it briefly attained during intraday trading. Only four other esteemed U.S. companies — Apple Inc., Alphabet Inc., Microsoft Corp., and Amazon.com Inc. — boast valuations surpassing $1 trillion.

Angelo Zino, an analyst at CFRA Research, goes as far as to assert that Nvidia is the most pivotal company globally in an era rapidly transitioning toward greater AI capabilities.

Nvidia’s Stock Surges on Exceptional Revenue Forecast, Drawing Comparisons to Alphabet

The recent surge in Nvidia’s stock builds upon last week’s rally, started by a revenue forecast that exceeded the average Wall Street estimate by more than 50%, leaving some analysts astonished and describing it as “unfathomable” and “cosmological.”

The highest price target for Nvidia sets its valuation at approximately $1.6 trillion, placing it on par with Google-parent Alphabet.

Refinitiv data reveals that Nvidia’s forward price-to-earnings multiple (P/E), a common metric for evaluating stocks, stands at 47.23. This figure surpasses the P/E ratios of peers such as Qualcomm and Intel and exceeds the sector median of 18.09.

Summit Insights Group’s senior research analyst, Kinngai Chan, expressed the view that although Nvidia’s valuation may appear elevated at present, the company possesses substantial earnings potential, especially as the adoption of its AI GPU technology is still in its early stages.

Nvidia’s GPU Dominance Drives AI Surge and Growth

Analysts estimate that approximately 80% of the graphics processing units (GPUs) powering generative AI are produced by Nvidia. This has led major tech companies like Alphabet and Microsoft to capitalize on the potential of this technology.

Under the leadership of CEO Jensen Huang, Nvidia has strategically shifted its focus to the data center market. Additionally, this has transitioned Nvidia from its previous dominance in video game chips.

During the pandemic, Nvidia experienced significant business expansion as gaming gained popularity. Cloud adoption surged, and crypto enthusiasts turned to its chips for mining cryptocurrencies. Huang’s emphasis on AI will drive further growth in the upcoming months.