Nvidia has become the first-ever chipmaker to reach a market value of $1 trillion. This boom has been driven by the increasing demand for its Artificial Intelligence (AI) chips, which are responsible for powering the chatbot sensation ChatGPT, as well as many other applications. Nvidia’s share price climbed to a record high of $419.38, which is an increase of up to 7.7%. The increase in Nvidia’s shares over the past week has left it valued ahead of its peers. The increased valuation has prompted analysts to raise their price targets on the stock, valuing it at around $1.6tn. Although Nvidia’s forward price-to-earnings multiple (P/E) seems high compared to peers, analysts expect there to be room to grow as generative AI technology is in its early stages, with widespread adoption expected in the coming years.
Nvidia is a gaming and AI chip maker known for leading the videogame chip market with its technological advancements. The company’s founder is Jensen Huang. Through his leadership in the last few years, the company was able to pivot towards the data center market. The company’s business rapidly expanded during the pandemic when gaming took off, cloud adoption surged and crypto enthusiasts turned to its chips for mining cryptocurrencies. Huang’s bets on AI are expected to fuel growth in the coming months.
Nvidia’s surge is mainly due to the increasing demand for AI chips, which is driving the market. NVIDIA’s forward price-to-earnings multiple (P/E) stands at 47.49, much higher than that of its sector peers Qualcomm and Intel and above the sector median of 18.09, according to Refinitiv data. Despite the sky-high valuation, analysts believe Nvidia’s AI chips business has room for growth. They predict that the company will harness the power of generative AI technology that is still at a nascent stage, which is expected to see wide adoption across the industry in the coming years.
