Nvidia became the first chipmaker to be valued at over a $1 trillion, before falling in trading later in the day.
The U.S. chipmaker’s market value rose 3 percent, to $401.15 on May 30, after tripling in value since October, due to its successful investments in Artificial Intelligence, as investors pile on to the firm.
The company needed to hold above $404.86 to remain at the trillion-dollar threshold.Nvidia Surges Ahead in Chip Manufacturing Race
Meanwhile, the rapid success of OpenAI-owned ChatGPT has prompted tech giants such as Alphabet and Microsoft to make the most of the new technology.Nvidia became the ninth public company to ever hit the $1 trillion level mark, joining tech giants Microsoft, Alphabet, Amazon, and Apple.
The Santa Clara-based chipmaker has far outpaced other firms on the benchmark S&P 500 Index, with its valuation surpassing its peers.
Some analysts say the AI boom may lead to its stock to rise even more, with the highest given estimate at about $1.6 trillion, which is on par with Alphabet.
The firm’s forward price-to-earnings multiple (P/E), a common benchmark for valuing stocks, is 47.49. well above that of peers Qualcomm and Intel, while also topping the sector median of 18.09, according to Refinitiv.With Big Tech companies shifting their focus to generative AI, there has been a massive rise in demand for graphics-processing units (GPUs) chips, 80 percent of which are produced by Nvidia.
GPU Chips in High Demand Due to Advancements in AI
Last week, Nvidia forecast $11 billion in sales for the second quarter of fiscal 2024 alone, significantly higher than the consensus estimate of $7.15 billion.“We thought if they beat the guidance by about 5 percent, that’s good enough for the stock to stay where it is. But they’re beating [the] guidance consensus by 50 percent,” said Pajjuri.
Intel traditionally has been a supplier of central processing units (CPUs), but Nvidia’s GPUs are essential for generative AI platforms like OpenAI’s ChatGPT and Google’s Bard.
Until recently, the primary use of GPU chips were for computer and video gaming, but this all changed when AI development and crypto mining transformed the entire future of the industry.
Nvidia CEO Jensen Huang pivoted the company from its original focus on videogame graphics cards toward the data center market over the last few years.
During the pandemic, the company’s revenue surged, when more people took to video gaming, while cloud use surged and crypto enthusiasts turned to its chips for mining crypto.
Analysts believe that the chipmaker’s investment into the AI tech sector is expected to more fuel growth in the coming months, as it spreads into mainstream use.
Reuters contributed to this report.