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HomeAIAI Frenzy Propels Nvidia to $2 Trillion Valuation on Wall Street

AI Frenzy Propels Nvidia to $2 Trillion Valuation on Wall Street

Nvidia (NVDA.O) briefly reached a $2 trillion market value for the first time on Friday, propelled by relentless demand for its chips, which have positioned the Silicon Valley company as a leader in the burgeoning field of generative artificial intelligence. This achievement came on the heels of another impressive revenue forecast from the chip designer, driving its market value up by $277 billion on Thursday, marking Wall Street’s most substantial single-day gain to date.

Analysts are drawing parallels between Nvidia’s rapid ascent over the past year and the picks and shovels providers of the 1800s gold rush era. Nvidia’s chips are integral to nearly all major players in generative AI, including OpenAI, the maker of ChatGPT, and Google. This widespread adoption has propelled Nvidia’s market value from $1 trillion to $2 trillion in approximately eight months—the fastest surge among U.S. companies, achieved in less than half the time it took tech giants like Apple (AAPL.O) and Microsoft (MSFT.O).

“For AI companies today – the leaders of the sector – what’s going to be binding for them is not going to be demand. It’s just going to be their capacity to answer the surging demand,”

Nvidia’s shares closed 0.4% higher on Friday, reaching a market value of approximately $1.97 trillion. Earlier in the session, they surged as much as 4.9% to hit a record high of $823.94, following a remarkable 16% jump on Thursday.

The shares have experienced an impressive surge of nearly 60% this year, building on their more than tripling in value in 2023. Nvidia’s remarkable performance in 2024 has played a pivotal role in the gains of the S&P 500 (.SPX), contributing to over a quarter of the stock index’s rise this year.

The company’s latest market-beating forecast, predicting a staggering 233% growth in first-quarter revenue, helped propel global markets to record highs on Thursday.

“I’m a European fund manager, but I must have had more emails about their results than I’ve had about any other set. There have been calls, every broker doing 10-minute debriefs, it’s been mind boggling,” said one investor, who declined to be named.

Despite the surge in its share price, Nvidia’s valuation has decreased due to rapid increases in analysts’ estimates. According to LSEG data, its 12-month forward price-to-earnings ratio now stands at approximately 31, down from 49 times a year ago.

“Leading cloud computing companies plan to boost their capital expenditure to satisfy demand for AI training and inference, and it appears that virtually all this spending will fall into Nvidia’s pockets,” said Brian Colello, a strategist at Morningstar.
“We anticipate revenue will rise by a couple of billion each quarter throughout fiscal 2025 for Nvidia as more chip supply comes online.”

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