Nvidia joins $1 trillion valuation club, AI drives growth

The chipmaker company Nvidia has fleetingly joined the elite club of U.S. companies recording a $1 trillion market value reaping benefits from the AI boom.

In less than eight months, the value of stock has tripled which reflects the surge in interest in artificial intelligence following rapid advances in generative AI, which can engage in human-like conversation and craft everything from jokes to poetry.

Nvidia has gained about 200% since October, far outpacing any other member of the broad-market S&P 500 index. The rally has propelled its valuation past its peers, but some analysts say the AI boom means the stock should still be worth more.

On 30th May, the company’s shares closed 3% higher at $401.11, just a hair's breadth away from the $1 trillion valuation mark after hitting that level in intraday trading. Apple Inc, Alphabet Inc, Microsoft Corp and Amazon.com Inc have a valuation of more than $1 trillion.  

"We view Nvidia as the most important company on the planet in an era that is rapidly changing towards one that will be emphasized by greater AI capabilities," CFRA Research analyst Angelo Zino said.

The latest surge furthers a rally from last week, which was jump-started by a revenue forecast that surpassed the mean Wall Street estimate by more than 50%, which some analysts called "unfathomable" and "cosmological."

The highest price target values the company at about $1.6 trillion, on par with Google-parent Alphabet.

Nvidia's forward price-to-earnings multiple (P/E), a common benchmark for valuing stocks, is 47.23. The figure is significantly above that of peers Qualcomm (QCOM.O) and Intel (INTC.O) and also tops the sector median of 18.09, according to Refinitiv data.

"While the company's valuation looks lofty at the moment, we think Nvidia has the earnings firepower as the adoption of its AI GPU remains in the very early innings," Kinngai Chan, Senior Research Analyst at Summit Insights Group, said.