Nvidia Becomes First Company to Reach $4T Market Cap

Not so long ago, the most valuable company in the world was $200B. It feels like only a few years ago that the $1T barrier was broken. Where will this stop?

Are these companies already more valuable than the VOC at its height, when it owned entire countries? Is that where we're headed?

If China finally figured out how to make whatever machines ASML does, that the sell signal for NVDA.

In what way would the successful implementation of chip design services overcome (b)?

They would need to make more offering design services, giving away their design secrets in the process, than selling a product protected by a massive moat. This would be slaughtering the goose.

If you can present an example of someone executing this strategy as a pivot from an extremely high margin proprietary product and increasing their market cap as a result I would be very interested to read about it.

One thing that can hurt them is a shift from current neural networks to something that is more sequential in nature and thus better suited for a CPU.

One scenario is that maybe a smaller NN is enough for most tasks but you have to train it in a smart way (search, creating feedback, reasoning).

It's a long shot but maybe GPUs won't be the best hardware for the job. It's a pure speculation though.

(c) a technological breakthrough that makes what Nvidia makes obsolete.

Also just LLMs getting more efficient in general can lead to the end of the GPU buying frenzy

(b) isn't likely because CUDA. Nvidia spent a LOT of time developing CUDA into the de-facto standard for working with GPUs. No one has anything close to comparable. They poured a ton of time and effort into it and pushed it like crazy in the education space as well.

(a) can happen, but Nvidia has some buffer. All these companies promised their shareholders huge massive gains if only they embrace the AI revolution. They will be extremely resistant to admit they can't make any money out of it and will keep the charade going for as long as they can. It won't be like a cliff, so Nvidia has time to adjust and handle it.

The market cap is nonsense though, it's just hype. I never put any real weight on them.

In other words we hate them and want them to fail. Bill Gates, Elon Musk, the same story repeats again.

(c) NVidia isn't all about LLM, it has robotics, embedded, vision.. This is going to be huge as generic robotics hits.

Another lesson is to try to be incredibly lucky.

I'm not suggesting this is all luck, Nvidia has executed very well and their early investments in programmable GPUs really paid off as a result, but a lot of their insane valuation now is due to crypto and then LLMs which are basically two back to back once in lifetime goldrushes where Nvidia happened to be the best positioned shovel seller.

You can run a company well to prepare to ride such a wave should it appear, but you've also got to be born with horseshoes up your ass for this to work out as well as it has for Nvidia

I think Nvidia's market development efforts have meant more than its culture. Ever since Nvidia started moving towards general purpose compute with the 8800 GPU back in the mid 2000s, it's been actively growing markets - first in research (leading to AI advances), and now in autonomous driving, world simulation, biotechnology, and robotics.

The market for compute is endless, and Nvidia makes huge efforts to commoditize the software side of things so people can buy hardware.

isnt the modern LLM frenzy googles second?

NVIDIA put a lot of effort into making their hardware and accompanying software useful and usable. CUDA by itself might have never got any attention if not for the effort that NVIDIA puts into helping their customers use their technology, effectively. And they are by no means perfect at it. Most of their products are a horrible mess and they often have 7 different ways to do the same thing. A lot of their libraries are closed source and you're forced to use an API that links to a black box. There's lots to complain about.

Amazon ($2.3T)? Microsoft ($3.7T)? Meta ($1.8T)?

I thought Apple would drive it to the ground after their fallout considering how Jobs handled things. Nvidia rode that crypto wave and AI was there at the very end of that rainbow. Having said that, they kept at CUDA all these years even before pandemic. They earned it 100%!

NVDA's current forward P/E ratio (price to earnings) is about 37.

That means if we hold constant the profit earnings, if you bought the whole company at its current valuation ($4tr), it would take you 37 years to break even.

Is this reasonable? Depends on sector and growth potential. To me, this is a "fair" valuation and not overly inflated based solely on existing earnings.

Thing is, NVIDIA ships waaaay more than GPUs. Or, perhaps more accurately, NVIDIA ships chips. Other manufacturers install those chips. Sitting in my office right now, I have 5 computers, and between them I'd estimate I have 15 NVIDIA chips, minimum. Maybe more, I haven't carefully examined my NVIDIA-based, ASUS-manufactured graphics card to see how many name-brand chips it has.

That's to say nothing of all the other products and services they build. I just visited their website, clicked on "solutions" at the top, and there's waaaay more there than just desktop GPUs. And its worth noting that NVIDIA doesn't manufacture or sell any of the down-market NVIDIA-based boards.

Given NVIDIA's role in data centers, I think the 4T market cap is, while probably still somewhat inflated by speculation, not so inflated as to be a bubble ready to pop.

It seems fairly obvious, to me, that the issue is that most people make money from the stock price changing rather than from any kind of intrinisic value of the underlying company.

In other words, why should it matter to me what the company's profit margin or asset base or what not is actually worth when I make money if the stock number goes up?

You are way off. A single B200 costs $70k. They sell them in racks for over $3mm each. And they have 55% net profit margin.

The market price is supposed to account for future growth, not just for current revenue. Predicting future is speculative by definition, but it's not completely detached from reality to bet that Nvidia has the potential to grow significantly for some time (at some point either the market cap or the multiple will correct of course).

I also see where the reasoning here contradicts the reality. If we assume Nvidia only sells $1000 gpus and moves a few millions a year, then how did it received $137B in FY2025? In reality they don't just sell GPUs, they sell systems for AI training and inference at insane margins (I've seen 90% estimates) and also some GPUs at decent margins (30-40%). These margins may be enough to stimulate competition at some point, but so far those risks have not materialized.

Yeah, but their AI/data center GPUs go for closer to $100K, and I've heard that they obtain >50% margins on those. I agree with your overall point that the $4T valuation is not justified by current profits.

Nvidia's revenue is $44 billion in the last quarter. It's been growing at 5 billion a quarter. With a 50% profit margin. It is the most profitable company in the world; just take a look at the fiscals. If that justifies the valuation or not, your guess is as good as mine.

Nvidia's trailing P/E ratio is 53 (stock hitting a new high today). Its forward P/E ratio is 38.

A year ago both its trailing and forward P/E were higher. So the stock is relatively a bargain compared to what it was a year ago.

The price implies that revenues and profits are expected to continue to grow.

> My intuition is that the absence of the rapid, generationally transformative, advances in tech and industry that were largely seen in the latter half of the 20th-century (quickly followed with smartphones and social networking), stock market investors seem content to force similar patterns onto any marginally plausible narrative that can provide the same aesthetics of growth

I wouldn't disagree with this.

i ll give you the opposite viewpoint. 90% people are using AI because it is being forcefully shoved into google, amazon, microsoft etc. Most AI models offer little value at the moment and once the novelty wears off, even a real AI breakthrough will create aversion amongst the masses, this ll cause a huge crash

I think eventual 90% (more like 100%) usage is already priced in to nVidia's valuation.

Everybody already uses AI, it's being shoved down our throats. You literally cannot use Google or Amazon without AI nonsense popping up. People don't seem too happy about it though. I can't say that these features have improved my Amazon or Google experiences. In fact, in the case of the latter, the experience has only gotten worse as they've injected more AI.

I sincerely hope not

Smells like Universal Paperclips

...no? Leading-edge semiconductor manufacturing is incredibly difficult. Keeping pace with it is nearly impossible. Many companies and entire countries have tried - and failed, over and over and over. You can't just throw billions of dollars at the problem and hope you solve it.

It is far, far smarter to design the chips and leave the manufacturing to others who will have the expertise and take on the risk.

Literally pasting "Wikipedia list of companies by market cap" into Google gives me https://en.wikipedia.org/wiki/List_of_public_corporations_by....

https://en.wikipedia.org/wiki/List_of_public_corporations_by...