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Nvidia Briefly Hits Historic $3.92 Trillion Market Value Amid AI Boom

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Nvidia (NVDA.O) briefly surged to a market capitalization of $3.92 trillion on Thursday, putting it on track to become the most valuable company ever, fueled by Wall Street’s strong optimism around artificial intelligence (AI).

Key Highlights

  • Nvidia’s shares rose as much as 2.4% to $160.98, surpassing Apple’s record closing market cap of $3.915 trillion set on December 26, 2024.

  • At the time of the latest update, shares were up 1.5% at $159.60, with a market cap just under Apple’s record, at $3.89 trillion.

  • Nvidia’s AI-focused chips are in high demand for training large AI models, driving significant growth for the Santa Clara-based company.

Market Context

  • Microsoft holds the second spot in market value at $3.7 trillion, with shares rising 1.7% to $499.56.

  • Apple sits third with a market cap of $3.19 trillion after a 0.8% increase.

  • Other tech giants racing to build AI data centers and dominate AI include Amazon, Meta, Alphabet, and Tesla, all fueling demand for Nvidia’s high-end processors.

Industry and Stock Insights

  • Joe Saluzzi, co-manager at Themis Trading, remarked on the incredible scale of market valuations, noting the AI-driven surge pushing companies into multi-trillion-dollar territory.

  • Nvidia’s valuation has nearly octupled in four years, from $500 billion in 2021 to almost $4 trillion.

  • The company’s value now exceeds the combined stock markets of Canada and Mexico and all publicly listed companies in the UK.

  • Nvidia trades at about 32 times analysts’ forward earnings—below its five-year average of 41—reflecting growing earnings estimates outpacing stock gains.

  • The stock has rebounded over 68% since early April lows caused by trade uncertainty.

Broader Impact

  • Nvidia’s growth underscores Wall Street’s massive bets on generative AI technologies, as its hardware forms the backbone of many AI systems.

  • Nvidia now makes up 7% of the S&P 500 index; combined with Microsoft, Apple, Amazon, and Alphabet, these five tech giants constitute 28% of the index.

  • Despite optimism, some experts like Kim Forrest of Bokeh Capital Partners caution that current AI models might not fully live up to the hype.

Company Background

  • Founded in 1993 by CEO Jensen Huang, Nvidia evolved from a niche graphics chipmaker to a leading AI technology company.

  • The company replaced Intel on the Dow Jones Industrial Average last November, marking a significant industry shift toward AI-focused semiconductor development.

Microsoft to Cut Around 4% of Workforce Amid Heavy AI Investment Costs

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Microsoft announced it will lay off nearly 4% of its global workforce as part of efforts to control costs while investing heavily in artificial intelligence infrastructure. The company, with about 228,000 employees as of June 2024, had already begun layoffs in May affecting around 6,000 workers, primarily in sales roles.

The tech giant has pledged $80 billion in capital spending for fiscal year 2025, but the soaring costs of expanding AI capabilities have pressured profit margins. Microsoft’s cloud margin for the June quarter is expected to decline compared to the previous year.

In addition to workforce reductions, Microsoft plans to simplify its organizational structure by reducing management layers and streamlining products, processes, and roles. The gaming division, including its Barcelona-based King unit known for Candy Crush, will also see job cuts of about 10%, or roughly 200 employees.

Microsoft’s layoffs follow a broader trend among Big Tech companies investing in AI, with peers like Meta trimming about 5% of its lowest performers, Alphabet cutting hundreds of jobs, and Amazon reducing staff across various segments amid economic uncertainties and rising operational costs.

Intel CEO Considers Major Shift in Foundry Strategy, Focuses on 14A Chipmaking to Compete with TSMC

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Intel’s new CEO Lip-Bu Tan is contemplating a significant change to the company’s contract chip manufacturing business, potentially abandoning the costly 18A process developed under his predecessor to focus on the newer 14A technology. This move aims to better compete with Taiwan Semiconductor Manufacturing Co (TSMC) and attract major clients like Apple and Nvidia, sources familiar with the matter told Reuters.

The 18A process, which Intel invested billions in, is seen as losing appeal among prospective customers. Shifting focus away from it could lead to a substantial financial write-off for Intel, possibly costing hundreds of millions or even billions of dollars. Intel confirmed it would continue producing chips using 18A for its own internal designs, including the “Panther Lake” laptop chips planned for 2025, as well as fulfilling existing contracts with Amazon and Microsoft.

Tan, who took over in March, has quickly moved to cut costs and reshape Intel’s direction amid years of falling behind in chip technology. The 18A process, which features new transistor designs and energy delivery methods, was intended to rival TSMC’s leading-edge technology but is now considered roughly comparable to TSMC’s earlier N3 node.

By emphasizing 14A, Intel hopes to offer a more competitive foundry service and win contracts from major chip designers currently reliant on TSMC’s manufacturing. The company is customizing 14A to client needs and planning a strategic discussion with its board as soon as this month, with a final decision expected in the fall.

Intel’s move reflects the high stakes involved in regaining its manufacturing edge after a difficult period culminating in an $18.8 billion net loss in 2024. Tan has also revamped Intel’s leadership and streamlined management to improve agility.

While the strategy is still forming, the potential pivot marks one of Tan’s boldest efforts to restore Intel’s chipmaking leadership and profitability.