Nvidia reaches $1tn in market capitalization as it rides the AI wave

Silicon Valley company joins elite US-listed group including Apple, Microsoft and Alphabet .Nvidia has become the first chipmaker to hit a $1tn valuation, leading a surge of enthusiasm across Wall Street for companies seen to benefit from the latest developments in artificial intelligence.

The company’s shares rose by more than 4% to reach $406.1 at the start of trading on Tuesday in New York, after Jensen Huang , its chief executive , launched a new supercomputer on Monday and formed new AI alliances including WPP and SoftBank.

These moves gained momentum after Nvidia’s impressive performance last week. The company projected that its sales would increase to $11bn for the three-month period ending in July. This exceeded Wall Street’s earlier forecasts by over 50 per cent.

Nvidia, based in Silicon Valley, began its business 30 years ago by focusing on a niche market for 3D computer graphics. Its chips are used to power AI applications, including ChatGPT, OpenAI’s breakthrough chatbot. Big tech companies and cloud providers raced to upgrade their data centres technology in anticipation of what Huang declared on Monday as “the tipping-point of a new computing age”.

Chips with high processing power, such as H100 from Nvidia, are essential for building generative AI. These systems can create text and images similar to what humans produce. Generative AI is expected to bring new productivity tools, but it also poses a threat to jobs in media and education.

Nvidia, with a $1tn valuation, is part of an elite group that includes Apple’s parent Alphabet, Microsoft, Amazon, and Amazon.com.

Meta reached the $1tn mark in June 2021 when it was called Facebook. However, Meta dropped below that threshold just a few month later. Amazon was the first publicly traded company to experience a $1tn loss in market value in November, amid a larger sell-off of tech stocks.

Investors worried about a slowdown of corporate spending on data centres, and a pandemic in gaming and cryptocurrency. Shares of Nvidia dropped by half in 2022. The stock of Nvidia jumped 25 percent last week. This brings its gains in 2023 up to over 180 percent.

Jefferies analysts have calculated that Nvidia’s quarterly revenue for its data centre business will surpass combined sales of Intel’s and AMD’s central processing units – the traditional workhorses that power the servers that run the world’s largest internet services – for the first ever time in this market.

Morgan Stanley said that Nvidia’s upgrade to its outlook last week was “the biggest dollar revenue increase in the history of the industry”, and added: “We have no precedent in historical times for this magnitude.”

Microsoft, Palantir, and AMD are also companies that have seen their share prices rocket in the past year.

Experts have expressed concerns about the rise in AI. On Tuesday , a group of scientists said that AI was such a powerful technology that “minimizing the risk of extinction due to AI should be an international priority along with other societal risks like pandemics or nuclear war”.