Could Nvidia Be the First Stock to Reach a $10 Trillion Valuation?

While it might still be years away, it is significant to consider that at some point, a company will likely reach a $10 trillion valuation.

Nvidia (NVDA) is once again experiencing a surge in stock price. Recently, the artificial intelligence (AI) chip leader reached a new all-time high, driven by a robust third-quarter earnings report from its partner Taiwan Semiconductor Manufacturing. The excitement surrounding Nvidia's new Blackwell platform, which is reportedly sold out for the next year, has also contributed to this rise.

Nvidia's CEO, Jensen Huang, has described the demand for these new chips as "insane." On a similar note, Taiwan Semiconductor's CEO, C.C. Wei, quelled apprehensions about a possible AI bubble, stating that the demand for AI is genuine and just the beginning. He predicts that this demand will persist for many years.

Nvidia has significantly benefitted from the AI competition, with its stock soaring nearly 10x since the start of 2023, right after the launch of ChatGPT. In reaching this point, Nvidia has added around $3 trillion to its market cap and is now the second most valuable company globally, just behind Apple (AAPL). As of October 18, Nvidia's market cap stood at approximately $3.39 trillion, while Apple's was around $3.57 trillion, and Microsoft was close behind at $3.11 trillion.

Can Any Company Achieve a $10 Trillion Market Cap?

At first glance, it may seem unrealistic to predict the first company to hit a $10 trillion market cap. However, history shows that such a milestone is achievable. Apple became the first U.S. company to hit a $1 trillion valuation back in August 2018, which seemed far-fetched at the time. Astonishingly, Apple managed to triple its valuation, reaching $3 trillion in just five years.

If Apple could achieve such rapid growth, the prospect of Nvidia—or another contender—tripling its value in the next five to ten years to attain a $10 trillion market cap is not entirely out of reach.

Competitors in the $10 Trillion Race

In addition to Nvidia, Apple, and Microsoft, there are several other companies with market caps exceeding $1 trillion, including Alphabet, Amazon, Meta Platforms, Taiwan Semiconductor, and Berkshire Hathaway.

For any of these companies to hit the $10 trillion mark, they would need to show substantial growth in both earnings and revenue while also expanding their potential markets. However, Berkshire Hathaway, the only non-tech company in this mix, might struggle to achieve this goal due to its focus on mature businesses that grow at a pace similar to the overall economy.

The tech giants, particularly those already over the $3 trillion mark, are better situated for growth compared to others with market caps close to or below $2 trillion.

Why Nvidia Holds the Edge

Out of the trio of Apple, Microsoft, and Nvidia, the latter is the fastest-growing. Nvidia has reported five consecutive quarters of triple-digit revenue growth, and although that streak might come to an end in the third quarter, analysts still anticipate impressive growth rates. A consensus projection suggests that Nvidia may see an 82% revenue growth in the third quarter and a continued robust growth rate of 43% in 2025.

Nvidia seems better equipped to take advantage of the next wave of technological innovation, as it has previously done in the realms of generative AI and cryptocurrency. Its strong foothold in AI GPUs positions it as a likely leader in emerging technologies, including autonomous vehicles and robotics.

However, it's essential for investors to acknowledge that the innovation paving the way for the first $10 trillion company might not be apparent today. Both Apple and Microsoft may face constraints in growth; while they lead their respective markets, the available expansion opportunities appear more limited. For example, the smartphone market has matured. Apple can encourage users to spend more or sell various accessories, but most consumers typically only need one phone.

Microsoft's business is largely tied to enterprise technology spending, where significant yearly growth is rare.

Will Nvidia Reach $10 Trillion?

The future of Nvidia reaching a $10 trillion valuation hinges on its ability to fend off competition, leverage the AI boom, and maintain or expand its impressive profit margins. This task isn't simple, but it remains a possibility, particularly over the next five to ten years.

Apple's remarkable leap from $1 trillion in 2018 to $3.5 trillion today demonstrates that there are no rigid boundaries when it comes to stock market valuations. Even with Nvidia already offering remarkable returns to its investors, further growth potential still exists. A market cap of $4 trillion doesn’t seem out of reach for Nvidia, and with time, the $10 trillion milestone could indeed be attainable.

Nvidia, AI, MarketCap