Nvidia has made stock market history once again by becoming the first company in history to achieve a $5 trillion market cap.
Shares in Nvidia (NASDAQ:NVDA) gained close to 5% in the opening half hour of trading on 29 October, enough to push its market cap beyond the $5 trillion threshold.
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“Nvidia's chips remain the new oil or gold in this world for the tech ecosystem,” said Dan Ives, head of global technology research at Wedbush Securities.
Nvidia’s share price has gained % in the 12 months to 28 October, and Y% so far this year.
What pushed Nvidia’s market cap beyond $5 trillion?
Nvidia’s rise to becoming the world’s most valuable company has been propelled by its central position in the artificial intelligence (AI) revolution. Its graphics processing units (GPUs) are viewed as the cutting edge within the industry; not only are these chips viewed as the best available for training and improving AI models, but most AI developers now specifically build their software to run on Nvidia architecture.
The surge that saw Nvidia’s stock leap across the $5 trillion threshold was prompted by a keynote speech from its CEO, Jensen Huang, at Nvidia GTC Live in Washington DC on 28 October.
Huang made several announcements that each may have pushed its share price upwards in their own right, including a partnership with data analytics company Palantir (NASDAQ:PLTR) and a $1 billion stake in Nokia to develop 6G cellular technology to run on Nvidia chips. But perhaps the biggest announcement of all in terms of Nvidia’s fundamentals was that the company has “visibility” of $500 billion revenue through to the end of next year.
“This is how much business is on the books,” said Huang, referring to the backlog of orders for Nvidia’s Blackwell chips, as well as its next-generation Rubin chips which are expected to enter production next year. “Half a trillion dollars so far.”
These numbers have been received positively by analysts. “Even assuming the most conservative interpretation of [Huang’s] commentary [that all Data Center revenue across calendar years 2025 and 2026 would be over $500 billion] would suggest our assumptions for Data Center sales over the next six quarters are roughly 20% too conservative,” said Matt Bryson, managing director, equity research at Wedbush Securities.
Bank of America research analyst Vivek Arya raised his price objective for Nvidia stock to $275 from $235, saying that consensus revenue expectations were perhaps 10% too low and that “we believe Nvidia can maintain its strong mid-70s gross margin on the strength of its products, as it has strong co-design and volume support from multiple memory suppliers.”
But the catalyst that finally tipped Nvidia over $5 trillion came on the morning of 29 October, when president Donald Trump suggested that he will discuss Blackwell chips with China’s president Xi Jinping when the two meet for trade talks later this week.
Nvidia is currently barred from exporting its most advanced chips to China and this is largely down to US trade restrictions on strategically critical technology (though Beijing is also restricting imports in order to protect its own domestic chipmaking industry). With Huang having previously estimated the Chinese chip market could be worth $50 billion, but no sales to the country currently featuring in Nvidia’s projections, regaining access to this market would be a significant development for Nvidia.
Should you invest in Nvidia?
Many investors will baulk at the idea of any individual company being worth $5 trillion. Nvidia may or may not be worth this amount – it’s the nature of the stock market that prices can only be justified or deemed too expensive with hindsight.
The investment case for Nvidia assumes that the rollout of AI – and the consequent spend on Nvidia’s chips – will continue to accelerate into the future.
But a slowdown could challenge this thesis. Many are worried that the stock market, saturated as it is with AI-focused mega-cap stocks, represents an AI bubble that could burst.
On this reckoning, Nvidia might be overvalued at $5 trillion.
That said, Nvidia has made a track record of confounding naysayers in recent years. Its shares gained over 1,300% in the three years to 28 October (a period that begins almost exactly one month before ChatGPT’s public launch). Throughout most of that run, various commentators have argued that Nvidia’s valuation was too high.
Ultimately, investing in Nvidia shares is an individual decision and should be based on an individual’s circumstances. It is worth noting, though, that Nvidia currently comprises over 8% of the S&P 500 and 5% of the MSCI All World index (an index that represents the global stock market), so you may well already have significant exposure to Nvidia via passive investments or your pension.
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