May 27, 2023 - Economy

Nvidia stock's AI-fueled rise puts it on trillion-dollar club's doorstep

Data: FactSet; Chart: Axios Visuals

The stock market's top story this past week — aside from the will-they, won't-they debt ceiling drama — was a gargantuan earnings report from chipmaker Nvidia.

The big picture: Huge numbers from its AI-centric data center unit catapulted its shares, which have trounced both the overall market and the largest names in corporate America over most of the last decade.

Why it matters: Nvidia's remarkable rise may represent the emergence of new American corporate giant.

  • With a market value now more than $950 billion, it may soon join the trillion-dollar-market-cap club — the current members are just Apple, Microsoft and Amazon.

State of play: Over the last 10 years, Nvidia's shares have risen more than 10,000%, the best performance of any company in the S&P 500 over that period.

  • That rise has created more than $940 billion in stock market wealth.

Reality check: That sounds incredible. And it is. But it's worth noting that it's possible that we're simply catching the company's performance at some sort of sugar-rush peak.

  • For example, Tesla — at its peak in November 2021 — was up 19,000% over the previous decade. (About 10,000 percentage points of that gain have subsequently disappeared, as the shine rubbed off the shares.)

The big picture: Nvidia and some other semiconductor firms appear to occupy a remarkably lucrative spot in the American technology ecosystem.

  • Their silicon serves as the picks and shovels of every high-tech gold rush that comes along, whether it's cloud computing, crypto or the AI hype that seems to be proliferating by the hour.
  • In other words, Nvidia benefits from the lofty investor expectations about the future, while simultaneously seeing growth in profits and sales today.

The bottom line: As Nvidia shareholders can tell you, that's a very good place to be.

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