Nvidia set to become first US$5 trillion firm as AI rally extends

[NEW YORK] Nvidia is on track to become the first US$5 trillion company as chief executive officer Jensen Huang’s spree of deals around the world propels the artificial intelligence (AI) trade to new heights.

The shares rose as much as 3.5 per cent to US$208.1 in premarket trading, putting the stock on track to hit a market valuation of a little more than US$5 trillion.

The milestone cements Nvidia’s status as the largest company in the world, and comes less than four months after it cracked the US$4 trillion barrier.

Only two other companies are even somewhat close to Nvidia in size: Microsoft and Apple, which carry valuations of about US$4 trillion.

“A US$5 trillion market cap would’ve been unimaginable a few years ago, especially getting here this quickly,” said Keith Lerner, chief investment officer and chief market strategist at Truist Advisory Services.

“The market is certainly putting a lot of stock into the idea that AI will be transformational and change business models.”

Nvidia’s latest rally comes as US President Donald Trump said he expects to speak with China’s Xi Jinping about the company’s flagship Blackwell AI chip.

The stock has risen 50 per cent this year, creating about US$1.6 trillion in value, and it is responsible for nearly a fifth of the S&P 500 Index’s 17 per cent gain in 2025 through Tuesday (Oct 28).

Earlier this week, at the company’s GTC event in Washington, it showcased a new system to connect quantum computers, announced an expanded partnership with Uber Technologies, and prepared to unveil new contracts to supply AI chips to major South Korean companies like Samsung Electronics and Hyundai Motor.

Nvidia’s rise embodies how central AI has become to the US equity market. The stock is up about 1,275 per cent since the end of 2022, when its valuation was less than US$360 billion.

Nvidia currently accounts for 8.3 per cent of the weight of the S&P 500 Index. Wall Street analysts are overwhelmingly bullish on the firm’s future prospects too.

Of the 80 analysts tracked by Bloomberg that cover the company, more than 90 per cent have given its stock a buy-equivalent rating, with only one – Seaport Global Securities analyst Jay Goldberg – rating it a sell. The average price target for the shares is US$223.7, implying upside of about 11 per cent.

Nvidia shares are priced at less than 34 times estimated earnings, below their five-year average of about 39, and not far from the Philadelphia Stock Exchange Semiconductor Index at 29 times.

Still, it may be difficult for Nvidia shares to continue rising the way they have been.

“Investors have been taught to look past AI valuations, and if what everyone is betting on with AI comes to fruition, then valuations are probably justified, but certainly some of it might be difficult to live up to,” said Dan Eye, chief investment officer at Fort Pitt Capital Group.

He cites competition from companies like Advanced Micro Devices and Broadcom as a concern, along with moves by China to develop its own AI chips.

“Nvidia currently holds more than 90 per cent market share, and that’s more likely to go down than up,” he said. “Profit margins are likely to move lower rather than higher over time. It’s been tough to not own Nvidia, but it really is priced for elevated expectations.” BLOOMBERG