AI frenzy: Nvidia surpasses $1.5 trillion in estimated value

Nvidia’s market valuation surpassed $1.5 trillion for the first time on Wednesday as the frenzy for investing in anything related to artificial intelligence continues to push the manufacturer towards even greater earnings.

Shares rose just over one percent at closing, enough to lift the total market capitalization of semiconductor giant Jensen Huang from $1.48 trillion to $1.52 trillion, according to Refinitiv data.

Tech stocks with so-called mega capitalization have already risen 24 percent in 2024, continuing a winning streak from last year when they jumped nearly 250 percent due to an explosion of interest in ChatGPT.

Investors have highlighted Nvidia as a key AI stock due to its dominance in the market for graphics processing units (GPUs) that power OpenAI’s chatbot and other intelligent language tools.

Its triple-digit rise lifted it to a valuation of $1 trillion in May and established it as a member of the so-called ‘Magnificent Seven’ large tech companies, alongside Apple, Microsoft, Alphabet, the owner of Google, Amazon, the owner of Facebook Meta Platforms, and Tesla.

Nvidia was not the only member of that group to achieve a significant valuation on Wednesday.

Microsoft’s total market capitalization climbed to an unprecedented $3 trillion, while Meta surpassed $1 trillion for the first time since 2021, with shares performing well entering the new year thanks to cost-cutting in CEO Mark Zuckerberg‘s ‘Year of Efficiency’.

The beginning of a gold rush

Wedbush technology analyst Dan Ives believes this is just the beginning of the artificial intelligence gold rush. Even after a stellar year for AI-related tech stocks in 2023, investors can expect more gains this year as technology begins to boost corporate earnings.

– We believe tech stocks will rise by 25 percent in 2024 – wrote Ives in a recent note to Fortune. In the best-case scenario, Ives believes tech stocks could even see a 35 percent increase in 2024, bringing the Nasdaq Composite to a record 20,000.

The key to the well-known analyst’s optimistic view on tech stocks is based on one simple idea: use cases for artificial intelligence are ‘exploding globally’. Based on new research and his recent travels to tech companies around the world, Ives believes his colleagues on Wall Street are still ‘significantly underestimating how quickly this cycle of artificial intelligence monetization is unfolding.’

In recent years, there has been a fierce debate on Wall Street about how quickly artificial intelligence will impact the bottom line of large corporations. Some argue that the recent hype around artificial intelligence’s ability to cut costs and increase productivity, while justified in many ways, is a bit premature. This has led to some ‘risky’ stock purchases by inexperienced investors hoping to ride the trend, according to seasoned market observers. Even Amazon CEO Andy Jassy said last summer that some of the latest artificial intelligence tools are still part of the ‘hype cycle‘, claiming they are not yet capable of delivering significant results for companies.

On the other hand, more than 50 percent of all companies believe there are 20 or more use cases for generative artificial intelligence in their businesses, while over 80 percent see ten or more use cases, Wedbush revealed in a recent survey of large corporations. Ives argued that these survey results show that the benefits of using generative artificial intelligence in everything from data analysis to marketing are ‘becoming increasingly clear’ to businesses.