Yahoo Finance Nvidia becomes first chipmaker valued at more than $1tn amid AI boom
Nvidia has become the first chipmaker to reach a $1tn valuation after its shares soared further on Tuesday on the back of an anticipated boom in demand for its products to meet the needs of artificial intelligence.
Shares in the gaming and AI chip company rose 4.2% in early trading on Tuesday to pass the key milestone.
It came after the company’s valuation leapt by about a quarter last Thursday to $940bn (£760bn) after a forecast it released the previous day suggesting future revenues would hit $11bn for the three months to the end of July – more than 50% higher than the $7.2bn predicted by Wall Street.
Related: Nvidia gains $185bn in value after predicting AI-driven boom in chip demand
Wall Street analysts called Nvidia’s forecast “unfathomable” and “cosmological“, increasing their price targets in droves.
Companies across the economy are racing to show how they will incorporate AI into their existing businesses. Some analysts warn that an AI tech bubble may be forming, while chip companies are also increasingly caught up in the geopolitics of the US and China amid tit-for-tat restrictions on semiconductor exports.
Nevertheless, the rush for AI has provided a huge boost to businesses such as Nvidia that provide the hardware needed to run complex models with billions of inputs.
Nvidia had struggled in 2022 with a slowdown in demand for its graphics chips and also failed to buy the UK-headquartered chip designer Arm from Japan’s SoftBank, after competition regulators blocked the deal.
However, over the course of this year its share price had already more than doubled amid huge optimism over the rapid progress of generative AI products. These require massive data centres full of semiconductor chips to operate.
The other US companies that Nvidia joins in the $1tn dollar club are Apple, Amazon, Microsoft and the Google parent company, Alphabet. Meta, the owner of Facebook, Instagram and WhatsApp, clinched the $1bn market capitalisation milestone in 2021 but has since fallen back and was valued at about $670bn as of last close.
“Nvidia is the poster child for AI at the moment,” said Thomas Hayes, the chair of Great Hill Capital. “The market is coming to terms with if this AI trend is real.“
OpenAI-owned ChatGPT’s rapid success has prompted tech companies such as Alphabet and Microsoft to make the most of generative AI, which can engage in human-like conversation and craft everything from jokes to poetry.
