Nvidia barrels toward rare $1 trillion valuation after putting a dollar figure on AI boost
By Jeremy C. Owens
Nvidia stock is on its way to record highs and could push chip maker to heights previously only seen by Apple, Microsoft, Google, Facebook, Amazon and Tesla
Nvidia Corp. headed toward market-capitalization gains of nearly $200 billion in after-hours trading Wednesday, which could put the chip maker within sight of becoming only the seventh U.S. company to top a valuation of $1 trillion.
Nvidia shares (NVDA) jumped 25% in the extended session Wednesday, after executives predicted that revenue would exceed the company's record by more than 30% in the current quarter. The audacious forecast arrived as tech companies look to jump on advances in artificial intelligence that are largely powered by Nvidia's computing gear.
Nvidia ended Wednesday's session with a market cap -- the total value of all shares in existence -- of roughly $754.3 billion, according to FactSet. A 25% increase would add nearly $189 billion to that total, putting the company within striking distance of $1 trillion. Only six U.S. companies have ever attained a $1 trillion market cap: Apple Inc. (AAPL) and Microsoft Corp. (MSFT) are currently worth more than $2 trillion apiece; Google parent Alphabet Inc. (GOOGL) and Amazon.com Inc. (AMZN) have valuation of more than $1 trillion; and Facebook parent Meta Platforms Inc. (META)and Tesla Inc. (TSLA)have both touched the $1 trillion plateau previously.
For more: From U.S. Steel's $1 billion market cap to Apple's $1 trillion -- a brief history of valuation milestones
Nvidia's market cap was ahead of both Meta and Tesla as of Wednesday's close, with both worth less than $650 billion, showing the potential fleeting nature of such a valuation. Nvidia's record market cap is $834.4 billion, established on Nov. 29. 2021, according to Dow Jones Market Data.
If Nvidia's gains hold through Thursday's trading session, the company could challenge for the largest one-day market-cap gain in history. The biggest currently on record was Amazon's $191.2 billion increase on Feb. 4, 2022, according to Dow Jones Market Data, followed closely by a $190.9 billion gain by Apple on Nov. 10, 2022. Nvidia also stands to gain more than rival Advanced Micro Devices Inc. (AMD)is worth in total -- AMD ended Wednesday's session with a market cap of $174.4 billion.
Nvidia is closing in on the rare $1 trillion plateau because of huge gains in its stock this year, as hopes and hype about generative AI have flooded the tech sector. After OpenAI debuted its ChatGPT AI offering, and investor Microsoft quickly integrated the chatbot into many of its services, expectations for the technology have exploded.
Despite the hype, most companies have avoided providing hard figures for revenue gains expected from AI. Nvidia's fiscal second-quarter forecast -- which calls for roughly $11 billion in sales, nearly 33% higher than Nvidia's previous quarterly record of $8.28 billion -- could be seen as the first sign of a wave of fresh spending coursing through the tech sector.
Other companies have indicated that they will be forced to spend to develop their technology before reaping large financial rewards from it. Microsoft, for example, disclosed to investors last month that capital expenditures are increasing as it builds AI capabilities into its Azure cloud-computing platform -- spending that is largely going toward Nvidia.
Full earnings coverage: Nvidia stock soars toward all-time high as AI push leads executives to predict record revenue
That is a rather typical path for large jumps in tech spending: Companies that make the necessary hardware see gains before the companies that use that gear can develop offerings that take advantage of it. Other gear makers joined Nvidia in the sharp move higher in after-hours trading Wednesday, including AMD, which gained more than 10%; chip maker Marvell Technology Inc. (MRVL), which increased more than 5%; and networking specialist Arista Networks Inc. (ANET), which added about 5%.
Alphabet and Microsoft stocks both increased around 2% in after-hours trading, and software companies that have made AI a core part of their offerings also saw gains. Palantir Technologies Inc. (PLTR)and C3.ai Inc. (AI)shares both increased more than 8%, for example.
-Jeremy C. Owens
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May 25, 2023 07:55 ET (11:55 GMT)
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