Nvidia briefly worth $1 trillion thanks to AI boom
The elite club of US companies worth more than $1 trillion got a new member on Tuesday – at least for few hours.
Chip maker Nvidia briefly joined the ranks, as its share price shot up more than 5% before retreating.
Shares had already jumped more than 25% last week after the company forecast “surging demand” due to advances in artificial intelligence (AI).
Apple, Amazon, Alphabet and Microsoft are the other publicly traded US firms worth more than $1tn (£800bn).
Over the past 12 months, Nvidia’s share price has more than doubled, as investors bet the company will profit as AI ushers in the next wave of tech advances.
The California-based firm ended trading in New York on Tuesday worth more than $990bn, after shares closed at about $401 apiece, or up nearly 3%.
“We view Nvidia at the core hearts and lungs of the AI revolution,” Wedbush Securities analyst Dan Ives wrote last week, after the firm told investors it expected to bring in $11bn in sales in the three months to August – almost 50% more than analysts had predicted.
Living up to the promise of its lofty valuation could prove difficult, however.
Though Nvidia boomed during the pandemic, its overall revenue growth was flat last year, while profits were cut in half.
There are questions about whether Nvidia can keep up with demand, especially as rivals AMD and Intel race to develop their own offerings, and start-ups emerge.
The firm also faces ethical issues, such as whether it should vet the AI products for which it produces chips, amid swirling concerns about the impact of AI on society.
At current prices, Nvidia boasts a market value more than eight times higher than that of Intel. That’s despite Intel reporting more than $63bn in revenue last year, compared with Nvidia’s $27bn.
Geir Lode, head of global equities at Federated Hermes, said the magnitude of the recent leap in Nvidia’s share price was “an astonishing surprise even to techno-optimists”.