Nvidia hits $1 trillion in market value on booming demand for AI

Nvidia on Tuesday became the first chipmaker to join the trillion-dollar club, as the company bets on a surge in demand for its AI chips that power chatbot sensation ChatGPT and many other applications.

The gaming and AI chip company’s shares rose 4.2%.

Taiwan Semiconductor Manufacturing is the next largest chipmaker globally, valued at about $535 billion.

Meta Platforms valued at about $670b. as of last close, clinched the trillion-dollar market capitalization milestone in 2021, while Apple, Alphabet, Microsoft and Amazon.com are the other US companies that are part of the club.

Wall Street analysts called Nvidia’s forecast “unfathomable” and “cosmological”, hiking their price targets in droves. The highest price target valued the company at about $1.6 trillion, 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, said.

AI took center stage after Nvidia stunned investors with a revenue forecast last week that surpassed analysts’ expectations by more than 50%.

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

Nvidia’s shares rose about 25% last week sparking a rally in AI-related stocks and boosted other chipmakers, helping the Philadelphia SE Semiconductor index close on Friday at its highest in over a year.

“Technical traders and AI mania have pushed Nvidia toward the $1 trillion cap and it is not inexpensive,” said Jim Kelleher, analyst at Argus Research.

OpenAI-owned ChatGPT’s rapid success has prompted tech giants such as Alphabet and Microsoft to make the most of generative AI, which can engage in human-like conversation and craft everything from jokes to poetry.

(Reuters)