Thanks to AI, it seems a bunch of people want Nvidia’s semiconductors.
Is it Nvidia’s world and we’re just living in it?
At least, that’s how it seemed to many investors last week. The artificial intelligence (AI) microchip company’s market capitalization soared by $218 billion—yep, that’s a “b”—in just one day, on the heels of yet another quarterly earnings blowout.
That brought its total market cap to $2.6 trillion, putting the Santa Clara, California-based company in third place behind Microsoft and Apple.
Even more amazing, as seen in the chart, that one-day, $218 billion jump in Nvidia’s market cap was greater than the total market cap of 470—or a whopping 93%—of the companies in the S&P 500 index (including giants such as Disney, Pfizer, and Nike).
Nvidia, of course, has been at the heart of the artificial intelligence trend that has driven domestic markets since the start of 2023, when generative AI tools like chatGPT first gained popularity. For users to take advantage of these tools, cloud service providers such as Amazon (AWS), Microsoft (Azure), and Alphabet (Google Cloud) must provide a platform to host them. Those cloud services companies, in turn, need cutting-edge graphics cards and other chips to power their data centers.
Nvidia is currently the undisputed leader in this space, and its earnings call last week suggested that it will likely remain so for the foreseeable future.
Nvidia’s market-cap increase was the second-largest in a day by any U.S. company in history, according to Dow Jones Market Data. The largest? You guessed it: Nvidia, back in late February, with a nearly $277 billion one-day surge.
In the wake of investors’ continued infatuation with Nvidia, keep in mind that the S&P 500 is market-cap weighted—meaning that the largest stocks at any given moment have the biggest impact on the index’s performance. Therefore, owning a stock such as Nvidia could arguably become important to capture the market’s return; likewise, avoiding Nvidia could increase the risk of underperformance. That said, many other areas of potential opportunity remain that we continually assess as part of our approach to investment management.
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The CESIUSD Index, or U.S. Economic Surprise Index, is a Bloomberg index that measures daily data surprises relative to market expectations. The CESIGL Index, or Global Economic Surprise, is a Citigroup index that measures daily data surprises relative to market expectations.
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