Nvidia set to be first $6.5 trillion company as AI bets boom
Sign up now: Get ST's newsletters delivered to your inbox
Mr Jensen Huang had announced a flurry of new partnerships and dismissed concerns about an AI bubble on Oct 27.
PHOTO: BLOOMBERG
Follow topic:
CALIFORNIA – Nvidia is on track to become the first US$5 trillion (S$6.5 trillion) company as chief executive Jensen Huang’s spree of deals
The shares rallied 3.5 per cent to US$208.05 each in premarket trading, indicating that Nvidia will cross the milestone when the regular session begins.
It has only been four months since the company cracked the US$4 trillion barrier, and the rally has accelerated as Mr Huang forges new agreements to supply companies from Nokia Oyj to Samsung Electronics and Hyundai Motor Group with chips.
In a bull market that has been driven by optimism for AI to revolutionise the global economy, Nvidia stands in a league all its own. With a 50 per cent gain this year, the stock is single-handedly responsible for nearly a fifth of the S&P 500 Index’s 17 per cent advance in 2025. The next two biggest companies are Microsoft and Apple with valuations of about US$4 trillion each.
“A US$5 trillion market cap would have been unimaginable a few years ago,” said Mr Keith Lerner, chief investment officer and chief market strategist at Truist Advisory Services. “The market is certainly putting a lot of stock into the idea that AI will be transformational.”
Nvidia shares climbed on Oct 28 after US President Donald Trump said he expects to speak with China’s Xi Jinping about the company’s Blackwell chip. Mr Trump said months ago he would consider allowing Nvidia to export to China a downgraded version of its Blackwell processor, and the hope is that such a deal might be on the table.
On Oct 27, Mr Huang also announced a flurry of new partnerships and dismissed concerns about an AI bubble, saying the latest chips are on track to generate half a trillion dollars in revenue. The company also unveiled a new system to connect quantum computers with its artificial intelligence chips.
Wall Street analysts are overwhelmingly bullish on the firm’s future prospects. Of the 80 analysts tracked by Bloomberg that cover the company, more than 90 per cent have given its stock a buy-equivalent rating, with only one – Seaport Global Securities analyst Jay Goldberg – rating it a sell. The average price target for the shares is US$223.68 each, implying upside of about 11 per cent.
Nvidia shares are priced at less than 34 times estimated earnings, below their five-year average of about 39, and not far from the Philadelphia Stock Exchange Semiconductor Index at 29 times.
Still, given the dramatic gains recently, there is plenty of skepticism that Nvidia shares can keep soaring. The stock is already up about 1,275 per cent since the end of 2022. Mr Dan Eye, chief investment officer at Fort Pitt Capital Group, said Nvidia is likely to cede some market share to competitors like Advanced Micro Devices and Broadcom.
“If what everyone is betting on with AI comes to fruition, then valuations are probably justified, but certainly some of it might be difficult to live up to,” he said. “It’s been tough to not own Nvidia, but it really is priced for elevated expectations.” BLOOMBERG
