With $3.92 trn valuation, Nvidia on track to become most valuable company

Business Standard

a day ago

Nvidia hit a market value of $3.92 trillion on Thursday, briefly putting it on track to become the most valuable company in history, as Wall Street doubled down on optimism about AI.
Shares of the leading designer of high-end AI chips rose as much as 2.4 per cent to $160.98 in morning trading, giving the company a higher market capitalization than Apple's record closing value of $3.915 trillion on December 26, 2024.
The shares were last up 1.5 per cent at $159.60, leaving Nvidia's stock market value at $3.89 trillion, just short of Apple's record.
Nvidia's newest chips have made gains in training the largest artificial-intelligence models, fueling demand for products by the Santa Clara, California, company.
Microsoft is currently the second-most valuable company on Wall Street, with a market capitalization of $3.7 trillion as its shares rose 1.7 per cent to $499.56.
Apple rose 0.8 per cent, giving it a market value of $3.19 trillion, in third place.
A race among Microsoft, Amazon.com, Meta Platforms , Alphabet and Tesla to build AI data centers and dominate the emerging technology has fueled insatiable demand for Nvidia's high-end processors.
"When the first company crossed a trillion dollars, it was amazing. And now you're talking four trillion, which is just incredible. It tells you that there's this huge rush with AI spending and everybody's chasing it right now," said Joe Saluzzi, co-manager of trading at Themis Trading.
The stock market value of Nvidia, whose core technology was developed to power video games, has increased nearly eight-fold over the past four years, from $500 billion in 2021 to now near $4 trillion.
Nvidia is now worth more than the combined value of the Canadian and Mexican stock markets, according to LSEG data. The tech company also exceeds the total value of all publicly listed companies in the United Kingdom.
Nvidia recently traded at about 32 times analysts' expected earnings for the next 12 months, below its average of about 41 over the past five years, according to LSEG data. That relatively modest price-to-earnings valuation reflects steadily increasing earnings estimates that have outpaced Nvidia's sizable stock gains.
The company's stock has now rebounded more than 68 per cent from its recent closing low on April 4, when Wall Street was reeling from President Donald Trump's global tariff announcements. U.S. stocks, including Nvidia, have recovered on expectations that the White House will cement trade deals to soften Trump's tariffs.
Nvidia's swelling market capitalization underscores Wall Street's big bets on the proliferation of generative AI technology, with the chipmaker's hardware serving as the foundation.
The sharp increases in the shares of Nvidia and other Wall Street heavyweights have left people who save for their retirements through widely used S&P 500 index funds heavily exposed to the future of AI technology.
Nvidia now accounts for 7 per cent of the S&P 500. Nvidia, Microsoft, Apple, Amazon and Alphabet together make up 28 per cent of the index.
"I strongly believe that AI is a greatly productive tool, but I am fairly sure that the current delivery of AI via large language models and large reasoning models are unlikely to live up to the hype," cautioned Kim Forrest, chief investment officer at Bokeh Capital Partners.
Co-founded in 1993 by CEO Jensen Huang, Nvidia has evolved from a niche company popular among video game enthusiasts into Wall Street's barometer for the AI industry.
The stock's recent rally comes after a slow first half of the year, when investor optimism about AI took a back seat to worries about tariffs and Trump's trade dispute with Beijing.
Chinese startup DeepSeek in January triggered a selloff in global equities markets with a cut-price AI model that outperformed many Western competitors and sparked speculation that companies might spend less on high-end processors.
In November of last year, Nvidia took over the spot on the Dow Jones Industrial Average formerly occupied by chipmaker Intel, reflecting a major shift in the semiconductor industry toward AI-linked development and the graphics processing hardware pioneered by Nvidia.