Nvidia Could Be Days Away From a $4 Trillion Valuation

Nvidia technology, shown at a conference in Taipei in May. (Annabelle Chih/Bloomberg)

Nvidia shares were set to close out June with a gain of around 15%, more than three times that of the S&P 500, taking the world’s most important tech company closer to a valuation that could soon top $4 trillion.

Nvidia crossed the $1 trillion mark in June 2023, shortly after it effectively fired the starting gun on a race to benefit from demand linked to artificial intelligence with a revenue forecast for its powerful chips that obliterated Wall Street forecasts. It took another 262 days to reach $2 trillion, but only 96 days to get past $3 trillion, a level it reached on June 5, 2024.

Now, $4 trillion is in sight. The AI chipmaker, in fact, could reach that threshold in just a few weeks, given the stock’s daily average gain of around 0.8% over the past month, based on data from FactSet. Gains that size would lift Nvidia’s current value past the $4 trillion mark in just five trading days.

That would peg its value at more than 36% higher than the entire FTSE 100, Britain’s blue chip benchmark, and just 18% south of Japan’s entire Nikkei 225.

With a current market value of around $3.8 trillion, Nvidia’s weighting in the S&P 500 is about 6.9%, compared with about 6.7% for Microsoft and 5.4% for Apple. While some investors are concerned about Nvidia’s influence over the broader market, even that 6.9% underplays Nvidia’s valuation.

If Nvidia were to top the $4 trillion mark, it would represent almost 8% of the benchmark’s near $52 trillion in total market capitalization.

Created with Highcharts 9.0.1Nvidia’s market-cap milestones:Source: FactSet

Created with Highcharts 9.0.1$3T$2T$1T2023'24'2500.51.01.52.02.53.03.5$4.0 trillion

Forecasts for second-quarter earnings growth for the index suggest an overreliance on Nvidia. Analysts see the chip makers earnings soaring by 45% from a year ago to 99 cents a share when it reports in late August.

That is more than two and a half times the 17% advance expected for the S&P 500’s Information Technology sector and nearly 10 times the 5.7% earnings growth forecast for the entire S&P 500. Without Nvidia’s expected gain, growth for the index as a whole would be slower.

Robert Ruggirello, chief investment officer at Brave Eagle Wealth Management, which manages pension funds for retired New York City firefighters, said optimism about corporate investment in AI will continue to power Nvidia shares higher.

“I don’t know if new investors should buy a full position of Nvidia at this level with forward PEs north of 30 again, but not owning it is also painful given its extremely large index weighting,” he said.

“Obviously the valuation is less attractive today than it was in April, but momentum and sentiment are powerful draws for investors,” he added. “We continue to have a position in Nvidia and are phasing new clients into Nvidia.”

Corrections & Amplifications:

Nvidia would represent nearly 8% of the S&P 500 if its market value reached $4 trillion. An earlier version of this article incorrectly stated that it would represent around 13%.

Write to Martin Baccardax at martin.baccardax@barrons.com