Nvidia Becomes First Chip Maker To Hit $1 Trillion Market Cap: Report

Nvidia's shares rose nearly 6 per cent in morning trade. The report said that the company stocks will have to hold above $404.86 to maintain that distinction throughout the day.

Nvidia, the Santa Clara-headquartered chipmaker, hit a $1 trillion market cap at the open Tuesday, joining a small club of tech companies that have achieved this milestone. According to a CNBC report, Nvidia's shares rose nearly 6 per cent in morning trade. The report said that the company stocks will have to hold above $404.86 to maintain that distinction throughout the day.

News agency Reuters in its report has said that Nvidia's shares jumped about 25 per cent last week sparking a rally in AI-related stocks and boosting other chipmakers. It also helped the Philadelphia SE Semiconductor index close on Friday at its highest in over a year.

The gaming and AI chip company shares rose 4.2 per cent in early trading on Tuesday, according to the news agency. 

Taiwan Semiconductor Manufacturing (TSMC) is the next largest chipmaker globally, valued at about $535 billion, the report noted. 

Fewer than 10 companies globally have ever achieved a market capitalization level of $1 trillion, including Alphabet, Amazon.com, Apple, and Microsoft. According to the report, Meta Platforms Inc, valued at about $670 billion as of its last close, clinched the trillion-dollar market capitalization milestone in 2021. 

According to CNBC, last week, the stock of the chipmaker soared following the release of its quarterly earnings report, which surpassed consensus estimates by a significant margin in terms of both revenue and profit. Nvidia's impressive performance also uplifted other chipmakers, except for Intel, and was partly driven by unexpectedly optimistic forecasts.

Nvidia forecasted $11 billion in sales for the second quarter of 2024. Expected sales were 50 per cent higher than consensus estimates of $7.15 billion. The Reuters report noted that this forecast left Wall Street analysts astounded, with many labeling it as "unfathomable" and "cosmological." Analysts rushed to increase their price targets for the company, with the highest valuation reaching around $1.6 trillion, placing Nvidia on par with Google-parent Alphabet.

“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, told the news agency.

“Nvidia is the poster child for AI at the moment. The market is coming to terms with if this AI trend is real,” said Thomas Hayes, chairman at Great Hill Capital, according to the report. 

As reported by CNBC, Nvidia's graphics processing units (GPUs) play a crucial role in generative AI platforms such as OpenAI's ChatGPT and Google's Bard. While Nvidia has long been recognized as a leading player in the discrete GPU market, historically associated with gaming, the perception has shifted recently. The emergence of cryptocurrency mining and AI applications has disrupted the notion that GPUs are primarily for gaming, leading to a significant surge in share prices for GPU manufacturers and suppliers like Nvidia, AMD, and TSMC in recent months.

In contrast, Intel has faced difficulties with inventory management and development hurdles, as its primary focus has historically been on the central processing unit (CPU) chip market. As a result, Intel has not experienced the same level of investor interest as GPU manufacturers amid the recent surge in demand for GPUs driven by crypto mining and AI applications, the report noted.