Nvidia Becomes First Company to Reach $4T Market Cap

Not so long ago, the most valuable company in the world was $200B. It feels like only a few years ago that the $1T barrier was broken. Where will this stop?

Are these companies already more valuable than the VOC at its height, when it owned entire countries? Is that where we're headed?

Cisco stock (which I thought about buying in 1992 and didn't, unfortunately) doubled in 1990, tripled in 1991, doubled in 1992, and kept going up every year - in 1995 it doubled, in 1998 it doubled, in 1999 it doubled. So it had a long run (and is also still worth over $250 billion).

The monetary push is very LLM based. One thing being pushed that I am familiar with is LLM assisted programming. LLMs are being pushed to do other things as well. If LLMs don't improve more, or if companies don't see the monetary benefits of using them in the short/medium term, that would drag Nvidia down.

Nvidia has a lot of network effects. Probably only Google has some immunity to that (with its TPUs). I doubt Nvidia will have competition in training LLMs for a while. It is possible a competitor could start taking market share on the low end for inference, but even that would take a while. People have been talking about AMD competition for over two years, and I haven't seen anything that even seems like it might have potential yet, especially on the high end.

If China finally figured out how to make whatever machines ASML does, that the sell signal for NVDA.

(c) a technological breakthrough that makes what Nvidia makes obsolete.

In what way would the successful implementation of chip design services overcome (b)?

They would need to make more offering design services, giving away their design secrets in the process, than selling a product protected by a massive moat. This would be slaughtering the goose.

If you can present an example of someone executing this strategy as a pivot from an extremely high margin proprietary product and increasing their market cap as a result I would be very interested to read about it.

One thing that can hurt them is a shift from current neural networks to something that is more sequential in nature and thus better suited for a CPU.

One scenario is that maybe a smaller NN is enough for most tasks but you have to train it in a smart way (search, creating feedback, reasoning).

It's a long shot but maybe GPUs won't be the best hardware for the job. It's a pure speculation though.

Intel spins off GPUs and smart people make a decent competitor. AMD gets its act together, maybe acquires one of the tensor-based companies.

Some other competitor like Samsung releases something unexpected they've been building in secret.

Dollar value is decreasing fairly rapidly. Will be interesting to see what this means for financial markets, particularly overvalued elements.

Also just LLMs getting more efficient in general can lead to the end of the GPU buying frenzy

(b) isn't likely because CUDA. Nvidia spent a LOT of time developing CUDA into the de-facto standard for working with GPUs. No one has anything close to comparable. They poured a ton of time and effort into it and pushed it like crazy in the education space as well.

(a) can happen, but Nvidia has some buffer. All these companies promised their shareholders huge massive gains if only they embrace the AI revolution. They will be extremely resistant to admit they can't make any money out of it and will keep the charade going for as long as they can. It won't be like a cliff, so Nvidia has time to adjust and handle it.

The market cap is nonsense though, it's just hype. I never put any real weight on them.

In other words we hate them and want them to fail. Bill Gates, Elon Musk, the same story repeats again.

(c) NVidia isn't all about LLM, it has robotics, embedded, vision.. This is going to be huge as generic robotics hits.

Another lesson is to try to be incredibly lucky.

I'm not suggesting this is all luck, Nvidia has executed very well and their early investments in programmable GPUs really paid off as a result, but a lot of their insane valuation now is due to crypto and then LLMs which are basically two back to back once in lifetime goldrushes where Nvidia happened to be the best positioned shovel seller.

You can run a company well to prepare to ride such a wave should it appear, but you've also got to be born with horseshoes up your ass for this to work out as well as it has for Nvidia

I think Nvidia's market development efforts have meant more than its culture. Ever since Nvidia started moving towards general purpose compute with the 8800 GPU back in the mid 2000s, it's been actively growing markets - first in research (leading to AI advances), and now in autonomous driving, world simulation, biotechnology, and robotics.

The market for compute is endless, and Nvidia makes huge efforts to commoditize the software side of things so people can buy hardware.

NVIDIA put a lot of effort into making their hardware and accompanying software useful and usable. CUDA by itself might have never got any attention if not for the effort that NVIDIA puts into helping their customers use their technology, effectively. And they are by no means perfect at it. Most of their products are a horrible mess and they often have 7 different ways to do the same thing. A lot of their libraries are closed source and you're forced to use an API that links to a black box. There's lots to complain about.

To balance my own viewpoint, another way to look at it is that the dollar is weak, and will probably get weaker for the next 10 to 50 years

So that is helping Nvidia reach $4T, and all the other tech companies

They also probably have good ways of offsetting the weakness of the dollar, whereas regular citizens and investors don't

Amazon ($2.3T)? Microsoft ($3.7T)? Meta ($1.8T)?

isnt the modern LLM frenzy googles second?

NVDA's current forward P/E ratio (price to earnings) is about 37.

That means if we hold constant the profit earnings, if you bought the whole company at its current valuation ($4tr), it would take you 37 years to break even.

Is this reasonable? Depends on sector and growth potential. To me, this is a "fair" valuation and not overly inflated based solely on existing earnings.

Nvidia's trailing P/E ratio is 53 (stock hitting a new high today). Its forward P/E ratio is 38.

A year ago both its trailing and forward P/E were higher. So the stock is relatively a bargain compared to what it was a year ago.

The price implies that revenues and profits are expected to continue to grow.

> My intuition is that the absence of the rapid, generationally transformative, advances in tech and industry that were largely seen in the latter half of the 20th-century (quickly followed with smartphones and social networking), stock market investors seem content to force similar patterns onto any marginally plausible narrative that can provide the same aesthetics of growth

I wouldn't disagree with this.

DC GPUs from Nvidia are sold at $30-40k per piece. You might want to rethink your calculations.

Nvidia is going to sell >5 million Blackwells this year and will do $200b in revenue with that alone.

Nvidia has a high net profit margin of >50%. If Nvidia would make $4 trillion in revenue then they would have >$2 trillion in net profit. Then the market cap would easily be 5-10x higher than today because otherwise Nvidia would be the cheapest stock in history of all time.

Market cap is also a very bad indicator as it doesn't really tell how much money was really invested into the stock. Market cap is just a product of shares * prices. For example, I bought Nvidia shares in 2016 for a certain amount. These shares are >100x more valuable today but I didn't put any extra money into them. So 99% of "my" market cap was simply created by traders pushing up the stock price.

If tomorrow, the majority of Nvidia stock holders decide to sell and all stocks are sold then I guarantee you that never ever will $4 trillion be traded because if there is a strong sell move then the stock price will drop like a rock and the last sellers will get a fraction of money as they have based on todays market cap. We might be lucky to see $500b of trading volume.

It seems fairly obvious, to me, that the issue is that most people make money from the stock price changing rather than from any kind of intrinisic value of the underlying company.

In other words, why should it matter to me what the company's profit margin or asset base or what not is actually worth when I make money if the stock number goes up?

Thing is, NVIDIA ships waaaay more than GPUs. Or, perhaps more accurately, NVIDIA ships chips. Other manufacturers install those chips. Sitting in my office right now, I have 5 computers, and between them I'd estimate I have 15 NVIDIA chips, minimum. Maybe more, I haven't carefully examined my NVIDIA-based, ASUS-manufactured graphics card to see how many name-brand chips it has.

That's to say nothing of all the other products and services they build. I just visited their website, clicked on "solutions" at the top, and there's waaaay more there than just desktop GPUs. And its worth noting that NVIDIA doesn't manufacture or sell any of the down-market NVIDIA-based boards.

Given NVIDIA's role in data centers, I think the 4T market cap is, while probably still somewhat inflated by speculation, not so inflated as to be a bubble ready to pop.

You are way off. A single B200 costs $70k. They sell them in racks for over $3mm each. And they have 55% net profit margin.

The market price is supposed to account for future growth, not just for current revenue. Predicting future is speculative by definition, but it's not completely detached from reality to bet that Nvidia has the potential to grow significantly for some time (at some point either the market cap or the multiple will correct of course).

I also see where the reasoning here contradicts the reality. If we assume Nvidia only sells $1000 gpus and moves a few millions a year, then how did it received $137B in FY2025? In reality they don't just sell GPUs, they sell systems for AI training and inference at insane margins (I've seen 90% estimates) and also some GPUs at decent margins (30-40%). These margins may be enough to stimulate competition at some point, but so far those risks have not materialized.

>I’ll assume the average GPU price, for the sake of argument, is $1000.

They make big bucks on the premium end of their chips. Those contracts are typically on the 8-figure range, I would think they easily have thousands of them around the world.

Even Jensen has implied[1] that the consumer GPU market (i.e. gaming) holds a minor share of revenue these days.

1: Citation needed, I know. I mean comments like "we are not going to abandon gamers, etc...".