Nvidia (NVDA.O), the preeminent designer of high-end artificial intelligence (AI) chips, recently achieved a historic milestone, briefly reaching a market valuation of $3.92 trillion on Thursday. This monumental surge briefly positioned the company as the most valuable in history, surpassing Apple’s (AAPL.O) previous record closing value of $3.915 trillion, set on December 26, 2024. This unprecedented growth underscores Wall Street’s profound optimism and significant investment in the burgeoning field of AI.
The Soaring Valuation: Driven by AI Chip Demand
Nvidia’s shares experienced a notable rise of as much as 2.4% in morning trading, reaching $160.98. While the stock later settled slightly lower, up 1.5% at $159.60, leaving its market capitalization at $3.89 trillion, just shy of Apple’s peak, the brief ascent highlighted the intense demand for its specialized hardware.
The company’s newest generation of chips has been instrumental in training the largest and most complex AI models, leading to an insatiable appetite for Nvidia’s products among tech giants. This includes a fierce race among Microsoft (MSFT.O), Amazon.com (AMZN.O), Meta Platforms (META.O), Alphabet (GOOGL.O), and Tesla (TSLA.O) to construct advanced AI data centers and establish dominance in this transformative technology.
Microsoft currently holds the position as the second-most valuable company on Wall Street, with a market capitalization of $3.7 trillion. Apple, despite being briefly eclipsed, remains a formidable force, ranking third with a market value of $3.19 trillion. The sheer scale of these valuations is a testament to the rapid expansion of the tech sector. As Joe Saluzzi, co-manager of trading at Themis Trading, noted, “When the first company crossed a trillion dollars, it was amazing. And now you’re talking four trillion, which is just incredible. It tells you that there’s this huge rush with AI spending and everybody’s chasing it right now.”
Nvidia’s Exponential Growth and Global Scale
Nvidia, co-founded in 1993 by CEO Jensen Huang, has undergone a remarkable transformation. Evolving from a niche company primarily known for powering video games, it has become a central barometer for the entire AI industry on Wall Street. Over the past four years alone, Nvidia’s stock market value has increased nearly eight-fold, soaring from roughly $500 billion in 2021 to its current near-$4 trillion valuation.
To put its immense scale into perspective, LSEG data reveals that Nvidia’s current market capitalization is now worth more than the combined value of all publicly listed companies in Canada and Mexico. Furthermore, the tech giant’s valuation also surpasses the total value of all publicly listed companies in the United Kingdom.
Despite its rapid stock appreciation, Nvidia’s valuation metrics remain relatively modest. The company recently traded at approximately 32 times analysts’ expected earnings for the next 12 months, which is below its five-year average of about 41. This seemingly conservative price-to-earnings (P/E) ratio reflects the consistently increasing earnings estimates that have managed to keep pace with Nvidia’s substantial stock gains.
Nvidia’s stock has demonstrated remarkable resilience, rebounding more than 68% from its recent closing low on April 4. This earlier dip occurred when Wall Street reacted nervously to President Donald Trump’s global tariff announcements. However, U.S. stocks, including Nvidia, have subsequently recovered amid expectations that the White House will solidify trade deals, thereby softening the impact of Trump’s tariffs.
The swelling market capitalization of Nvidia profoundly underscores Wall Street’s immense confidence and significant bets on the widespread proliferation of generative AI technology. Nvidia’s hardware effectively serves as the foundational infrastructure for this burgeoning sector.
The sharp increases in the shares of Nvidia and other tech heavyweights have significant implications for average investors, particularly those saving for retirement through widely used S&P 500 index funds. These funds are now heavily exposed to the future trajectory of AI technology. Nvidia alone now accounts for a substantial 7% of the S&P 500 index (.SPX). When combined with Microsoft, Apple, Amazon, and Alphabet, these five companies collectively comprise an astonishing 28% of the entire S&P 500 index.
While the enthusiasm for AI is palpable, some caution remains. Kim Forrest, chief investment officer at Bokeh Capital Partners, advised, “I strongly believe that AI is a greatly productive tool, but I am fairly sure that the current delivery of AI via large language models and large reasoning models are unlikely to live up to the hype.”
Nvidia’s recent rally follows a relatively slower first half of the year, during which investor optimism about AI was somewhat overshadowed by concerns over tariffs and Trump’s trade dispute with Beijing. The market also saw a brief selloff in January, triggered by Chinese startup DeepSeek, which introduced a cut-price AI model that reportedly outperformed many Western competitors. This sparked speculation about whether companies might reduce their spending on high-end processors.
In a symbolic shift in the semiconductor industry, Nvidia replaced Intel (INTC.O) on the Dow Jones Industrial Average in November of last year. This move reflected a major industry-wide pivot towards AI-linked development and the graphics processing hardware that Nvidia pioneered. The company’s continued dominance in this critical segment positions it as a key player in the unfolding AI revolution.
