Nvidia's overnight carnival market value soared by more than $270 billion, and tonight is looking forward to another record

Finance Associated Press, February 23 (Editor Xiaoxiang) Almost eight months ago, shortly after Nvidia's 30th birthday, the "shovel seller" in this AI era became the first semiconductor company with a market value of $1 trillion.

And now, with the Goldman Sachs stock, which has been hailed as "the most important on the planet", last night set a record for a one-day increase in the market capitalization of a stock market in the history of the planet, and it is not far from the $2 trillion mark, which means it is about to set a new record.

After its share price soared 16% on Thursday, Nvidia's market capitalization increased by about $277 billion in just one day, bringing its total market capitalization to $1.96 trillion.

Nvidia's one-day growth in market capitalization dwarfs the previous record set by Meta three weeks ago, when it grew by more than $197 billion in a single day.

What is this equivalent to? The increase in NVIDIA's market value in a single day is almost equivalent to the entire total market value of Netflix. Before the concept of the "Magnificent 7" (Magnificent 7) that included Nvidia prevailed, the FAANG, which included Netflix, was the hallmark of the U.S. tech giants.

Expect a new record

Many people may have imagined in advance that it would be easier for Nvidia to reach the $2 trillion mark than it did in June last year, but the recent rise in its stock price has surprised everyone.

At present, although Nvidia is still a layer of window paper away from breaking the $2 trillion market value mark, no company has ever broken through the barrier so quickly.

If its stock price rises a little more tonight, the milestone jump from $1 trillion to $2 trillion, Nvidia will only take eight months. This would be a new record, as it took Microsoft two years and six months to go from $1 trillion to $2 trillion, and about two years for Apple.

It's no wonder that Stacy Rasgon, an analyst at Sanford C. Bernstein, made this sentiment overnight: "This company is like printing money." The outlook for sustained growth appears to remain solid. ”

Looking at the U.S. stock market, Nvidia is now the third most valuable company after Microsoft and Apple. Sadly, even though Microsoft and Apple's current quarterly revenues are much higher than Nvidia's, they have one thing in common: they both need Nvidia's GPU chips to support their growing ambitions in the artificial intelligence (AI) space.

In fact, almost all AI companies' data centers are inseparable from NVIDIA's GPU support.

In a sense, Goldman Sachs is not lying to praise Nvidia as the most important stock in the world today.

Is Nvidia expensive?

Interestingly, as Nvidia's market capitalization has skyrocketed, a question for many market participants is undoubtedly whether Nvidia is too expensive.

You know, since the beginning of this year, Nvidia's stock price has risen by 60%, and this is against the background of a cumulative increase of nearly 240% in the whole of last year......

However, many Nvidia bulls don't seem to be anxious about some of the concerns that are emerging in the market right now – they have found evidence to rely on in the price-to-earnings ratio gauge. To paraphrase a hot Internet meme, that is: "Where is it expensive? It has been this price (price-earnings ratio) for so many years, don't talk nonsense with your eyes open."

One set of comparisons shows that while Nvidia's stock price and market capitalization have soared, its earnings have even outpaced the growth of both.

This became even more evident after the release of Nvidia's "impeccable" earnings report this week: in the fourth quarter of fiscal 2024, which ended on January 28, Nvidia's revenue reached a record $22.1 billion, up 265% year-over-year, and revenue for the full fiscal year also hit a record high of $60.9 billion, up 126%. In terms of profit, the company's quarterly net profit was $12.285 billion, up 769% year-on-year, and adjusted earnings per share were $5.16, up 486% year-on-year, both record highs.

On some level, it's not Nvidia's profits that are catching up with market capitalization, but its market capitalization catching up with profit growth. This has led to an extremely rare phenomenon in which Nvidia's price-to-earnings ratio has continued to decline since mid-2023, despite a record rise in its stock price.

This point is outstanding in the comparison of the "Big Seven" of U.S. stocks in recent years.

Currently, Nvidia is trading at a dynamic price-to-earnings ratio of around 32 times based on EPS estimates, compared to 45 times for its rival AMD. Amazon and Microsoft also have higher valuation multiples than Nvidia.

The blowout profits not only boosted Nvidia's stock price, but also convinced the market that the AI boom is still booming. Against the backdrop of these dazzling halos, the price of the stock really doesn't look expensive. David Wagner, a portfolio manager at Aptus Capital Advisors LLC, said that even after taking into account the sharp surge since the beginning of the year, Nvidia is still one of the AI stocks with the lowest valuation ratio.

James Demmert, chief investment officer at Main Street Research, said, "Some investors have been afraid to buy because they feel that the stock price is already too expensive, which is a big mistake, and every time Nvidia reports its results, the price-to-earnings ratio goes down because the denominator is much larger than people expect." ”

The prestige and wealth of the "leather-clad knifeman" are both harvested

With NVIDIA's market capitalization and influence on the AI industry and financial markets growing, Huang, known as the "leather-clad knifeman", is now ushering in a double harvest of prestige and wealth.

According to the Bloomberg billionaires list, Nvidia's skyrocketing rally is about to put Huang on the verge of breaking new ground in his wealth: becoming one of the 20 richest people in the world.

Huang's net worth jumped $9.5 billion to $69.2 billion in one day on Thursday. The change will see him move beyond Charles Koch and Chung to No. 21 on the Bloomberg Billionaires Index. It's a terrific boost for the Nvidia co-founder, as he was still ranked 128th with a net worth of $13.5 billion at the beginning of last year.

According to public information, Huang, 61, owns a 3.1% stake in Nvidia.

In fact, the growth of wealth is only one aspect. After Nvidia became a leading AI stock, Huang's status in the U.S. technology and even corporate circles is now in full swing. Jim Cramer, an influential financial host in the United States, recently said that he believes Huang is more visionary than Musk.

"I think Musk can see an inflection point in the industry, but Huang is thinking about how to change the whole big picture that affects the world. Huang single-handedly sparked an industrial revolution. Musk, on the other hand, single-handedly brought innovative products. There's no doubt they're all talented, but who better to do it all when it comes to starting an industrial revolution?" says Cramer.

Previously, Cramer had compared Jensen Huang to American pop queen Taylor Swift, arguing that both were unmatched in their respective fields.

Dan Ives, a senior equity analyst at Wadebush, also praised that Huang is becoming the godfather of AI, and Nvidia's Q4 results are the most important corporate earnings report in years, and from the perspective of peak demand, this AI party has just begun.

He said that this huge wave of spending will flood the rest of the tech companies, "in our view, it will continue to drive the tech bull market". In the next two or three years, companies such as AMD may also participate in the competition, but for now Nvidia is the "only player", and the company's stock price may eventually rise to four figures.

(Finance Associated Press Xiaoxiang)