NVIDIA (NVDA.US) recently made history by becoming the first company to reach a $5 trillion market capitalization. This milestone underscores its immense influence in the global economy. As the chipmaker at the heart of the AI revolution, NVIDIA is not only the world's most valuable company but also potentially the most influential stock in Wall Street's history.
Since early 2023, NVIDIA has been a primary driver of the stock market rally, delivering massive returns to shareholders and adding billions to CEO Jensen Huang's fortune. Its market cap now exceeds six of the S&P 500's 11 sectors and surpasses the total stock market size of most countries.
"Historically, this is an extraordinary anomaly—a once-in-a-generation phenomenon," said Matt Miskin, co-chief investment strategist at Winslow Capital Management.
Last week, NVIDIA announced partnerships with Nokia, Samsung Electronics, and Hyundai Motor Group. While the company won't report earnings until mid-November, recent tech giant earnings highlight its growth potential. Microsoft, Amazon, and Meta have all pledged to increase AI investments, with their combined capital expenditures projected to rise 34% to $440 billion over the next 12 months—a key factor driving NVIDIA's expected $285 billion revenue for the next fiscal year (up from $11 billion in FY2020).
This explosive growth has fueled debates about an AI-driven market bubble, with NVIDIA at its center. Huang downplayed concerns about overheating at the annual GTC conference, and Fed Chair Jerome Powell dismissed comparisons to the late-1990s dot-com bubble.
"Such trends eventually reverse, and we expect this one will too," Miskin noted. "But for now, AI leaders like NVIDIA continue to deliver the strongest earnings. A market leadership shift would require that to change. The S&P 500 does face concentration risks."
Five key data points illustrate NVIDIA's $5 trillion ascent and its market impact:
1. **S&P 500 Dominance**: NVIDIA's 8.5% weight in the index exceeds the combined weighting of its bottom 240 companies—likely a record, per S&P analyst Howard Silverblatt. The "Magnificent Seven" tech stocks now account for over 36% of the S&P 500, with Apple second at 6.9%.
2. **Bigger Than Most National Markets**: NVIDIA's market cap surpasses the combined stock markets of the Netherlands, Spain, the UAE, and Italy. It now eclipses all equity markets except those of the U.S., China, Japan, Hong Kong, and India.
3. **Bullish Price Targets**: 91% of analysts rate NVIDIA a "buy." HSBC's Frank Lee set the Street-high target of $230 (implying ~$8 trillion valuation), while Harbor Global's Jay Goldberg maintains a $100 "sell" target—despite the stock doubling since his April call.
4. **Unmatched Revenue Growth**: Defying the typical slowdown as companies scale, NVIDIA's revenue is projected to grow ~60% this fiscal year—far outpacing the S&P 500 average (6%), Microsoft (15%), and Apple (6.2%), though slower than its 126% and 114% surges in prior years.
5. **Huang Joins World's Top 10 Billionaires**: Huang's net worth has soared to $176 billion (up $60 billion YTD), per Bloomberg, placing him among the global elite. SEC filings show he holds ~3.5% of NVIDIA via personal and trust holdings.
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