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Nvidia Corporation became the first company on the Nasdaq Stock Market to reach a market capitalization of US$5 trillion. Shares of the California-based semiconductor company rose 4.88 per cent in the session to close at a record US$201.03 on Thursday overtaking the milestone. Nvidia stock has more than quadrupled in the past year gaining 44 per cent in the last 12 months and surging 84.47 per cent over the last six months. The current value of Nvidia Investors are driving up Nvidia’s value not just on the strength of its earnings but also because of what its business represents: the transition of the company from a graphics-chip specialist to a maker of the processors that now underpin the world’s artificial-intelligence systems. The world is writing AI into how companies work - Nvidia is writing its code. And while Nvidia’s shares closed Thursday about where they were a month ago the stock still has nearly doubled this year as it trades at its highest levels since the company went public in 1999. For the quarter Nvidia reported better-than-expected revenue and profit and predicted US$500 billion in chip sales as demand for its processors for AI data centers is booming. It is also building seven supercomputers for the U.S. government. Earlier in April Nvidia crossed the US$4 trillion market cap making it the first publicly listed company to do so. Why US$5 trillion is important Nvidia’s new valuation represents an entirely new level of market value: it is greater than the market capitalization of most countries’ equity markets. It has already eclipsed US$4 trillion which has been compared to the GDP of Japan or India. At this scale Nvidia can have an outsized effect on not just technology indices but broader market movements. The company’s valuation has also raised questions as to whether its valuation is sustainable and whether other big tech companies such as Microsoft Corporation or Apple Inc. can reach such valuations in the near future. Moving forward At this level of market cap any unexpected negative news or market correction could lead to a significant pullback in value for the company. Nvidia may have a bright future as a leader in the AI industry but it faces challenges from geopolitical tensions (in particular U.S.-China export restrictions) chip design competition and high expectations. For now Nvidia’s rise has already reached a milestone: it’s a first in Nasdaq history and is a vote of confidence from the market in the AI revolution Nvidia is betting on.
