Nvidia rides AI boom to become the first company to reach $5-trillion valuation

Nvidia made history on Wednesday as the first company to reach $5 trillion in market value, powered by a stunning rally and global artificial intelligence boom.

The milestone underscores the company's swift transformation from a niche graphics-chip designer into the backbone of the global AI industry, turning CEO Jensen Huang into a Silicon Valley icon and making its advanced chips a flashpoint in the tech rivalry between the U.S. and China.

Since the launch of ChatGPT in 2022, Nvidia's shares have climbed 12-fold as the AI frenzy propelled the S&P 500 to record highs, igniting a debate on whether frothy tech valuations could lead to the next big bubble.

The new milestone comes just three months after Nvidia breached the $4-trillion mark.

"In the long run, we expect tech titans to strive to find second sources or in-house solutions to diversify away from Nvidia in AI, but these efforts will, at best, only chip away at, but not supplant, Nvidia's AI dominance," said Brian Colello, senior equity analyst at Morningstar.

Shares of the Santa Clara, California-based company rose 4.6 per cent after a string of recent announcements solidified its dominance in the AI race.

LISTEN | Ready to burst?:

The Current13:32Will the A.I. bubble burst?

Huang unveiled $500 billion in AI chip orders on Tuesday and said he plans to build seven supercomputers for the U.S. government.

Meanwhile, U.S. President Donald Trump is expected to discuss Nvidia's Blackwell chip with Chinese President Xi Jinping on Thursday. Sales of the high-end chip have been a key sticking point between the two sides in trade talks due to Washington's export controls.

Surge boosts Huang's wealth

At current prices, CEO Huang's stake in Nvidia would be worth about $179.2 billion, according to regulatory filings and Reuters calculations. He is the world's eighth-richest person, per Forbes's billionaire list.

Born in Taiwan and raised in the United States from age nine, Huang has led Nvidia since founding it in 1993. Under his leadership, the company's H100 and Blackwell processors have become the engines behind large-language models powering tools such as ChatGPT and Elon Musk's xAI.

While Nvidia remains the biggest inner in the AI rage, Big Tech peers such as Apple and Microsoft have also crossed $4 trillion in market value recently (Apple crossed that threshold just yesterday).

Analysts say the rally reflects investor confidence in unrelenting AI spending, though some warn valuations may be running hot.

"AI's current expansion relies on a few dominant players financing each other's capacity. The moment investors start demanding cash-flow returns instead of capacity announcements, some of these flywheels could seize," said Matthew Tuttle, CEO of Tuttle Capital Management.

Tech companies' heavy weightage in the S&P 500 and Nasdaq 100 gives them broad influence over global markets.

Nvidia is due to report quarterly results on Nov. 19.

Geopolitical bargaining chip

The company's dominance has drawn global regulatory scrutiny, with U.S. export curbs on advanced chips making it a key pawn in Washington's strategy to limit China's access to AI technology.

"Nvidia clearly brought their story to D.C. to both educate and gain favor with the U.S. government," said Bob O'Donnell of Technalysis Research. "They managed to hit most of the hottest and most influential topics in tech."

WATCH | Big gains for Nvidia:

Nvidia's dramatic rise to $3T | About That

June 12, 2024|

Duration10:04

Nvidia has had a dramatic rise. So how is a company that creates graphic chips now worth $3 trillion US? Andrew Chang explains Nvidia's huge gamble and how it created an entirely new industry that could change the world.

The company's developer conference on Tuesday also served as a platform for Huang to walk a geopolitical tightrope.

He praised Trump's "America First" policies for accelerating domestic tech investment, while warning that excluding China from Nvidia's ecosystem could limit U.S. access to half of the world's AI developers.

Rivals including Advanced Micro Devices and several well-funded startups are seeking to challenge Nvidia's dominance in high-end AI chips, but it remains the industry's top choice.