Nvidia’s growth has been remarkable, with its market capitalization surging from $1.1 trillion to $3.1 trillion over the past year. A tech investor known for his early predictions of Amazon and Tesla’s success believes this is only the beginning.
James Anderson, former partner at investment firm Baillie Gifford, told the Financial Times, “In the most optimistic scenario, the potential scale of Nvidia is unprecedented. It could result in a market cap reaching double-digit trillions. This isn’t a forecast, but a possibility, provided artificial intelligence proves beneficial for customers and Nvidia maintains its leadership.”
The chipmaker behind OpenAI’s ChatGPT has seen remarkable growth, driven by the AI boom that has created half a million new millionaires who invested in this transformative technology. Nvidia, alongside tech giants Amazon, Google, Microsoft, and Apple, now collectively holds a market value of $14.5 trillion, representing about 32% of the S&P 500.
It’s still uncertain whether Nvidia has the staying power to lead Big Tech into the AI frontier long-term, according to Doug Clinton, managing partner at Deepwater Asset Management. While Nvidia’s massive growth might seem intimidating, it’s actually sustainable given the anticipated rise in AI demand.
“Even though there’s concern that the demand for chips will eventually slow down, we haven’t seen that slowdown yet,” Clinton told Yahoo Finance last month.
Damodaran pointed out that Tesla experienced a similar surge in 2020, with its market cap peaking at $1.2 trillion in 2021, only to see a 30% drop this year. Meta and Google also faced increasing competition, weakening their dominance in the tech industry.
While Nvidia’s earnings support its high valuation, Damodaran believes future expectations might be overly ambitious. He argued that the AI chip market alone isn’t worth $1 trillion, and the broader AI market is valued at about $2 trillion to $3 trillion. Therefore, Nvidia would need to penetrate multiple significant AI markets to sustain and grow its current value.
With Nvidia commanding over 80% of the global GPU semiconductor market, Clinton believes the company is poised to continue thriving for the foreseeable future.