Nvidia Nears $4 Trillion Market Cap on AI Spending Surge

Nvidia Corp. is on the brink of achieving an unprecedented milestone, with the potential to become the first company to reach a $4 trillion market capitalization. This comes just two years after the chipmaker made history by becoming the first to achieve a $1 trillion market valuation.

Following a significant rally, Nvidia's shares have reached a record high, driven by sustained spending from its major customers on artificial intelligence infrastructure. This surge has pushed Nvidia's market capitalization to $3.8 trillion, surpassing Microsoft Corp. at $3.70 trillion to reclaim the title of the world’s most valuable company.

Analysts and investors are optimistic about Nvidia's future prospects, citing its dominant position in the AI accelerator market and a broadening customer base. Aziz Hamzaogullari, chief investment officer at Loomis, Sayles & Co., believes that Nvidia is uniquely positioned to maintain its leadership role for over a decade.

This bullish sentiment is echoed by Loop Capital analyst Ananda Baruah, who raised Nvidia’s price target to $250 from $175. Baruah expects annual AI spending to rise to nearly $2 trillion by 2028, driven by various types of customers. He highlights Nvidia's monopoly status in critical technology and its pricing power as key factors supporting its valuation.

Despite earlier concerns sparked by the emergence of advanced chatbots like DeepSeek, US tech giants are increasing their investments in computing infrastructure. Companies such as Microsoft, Meta, Amazon.com Inc., and Alphabet Inc. are projected to allocate about $350 billion into capital expenditures in their upcoming fiscal years, up from $310 billion in the current year. These companies account for over 40% of Nvidia’s revenue.

However, risks remain that could impact Nvidia's rally. The company's reliance on Taiwan Semiconductor Manufacturing Co. for chip production exposes it to potential disruptions from trade policies. Additionally, there is uncertainty regarding the spending patterns of Nvidia's largest customers, who are developing their own chips to reduce costs.

Nvidia shares are currently priced at 32 times earnings projected over the next 12 months, compared with 22 times for the S&P 500. Despite this premium valuation, Hamzaogullari remains confident in Nvidia's long-term prospects, viewing AI as a transformative technology that will drive significant productivity gains. He believes that while there may be short-term disruptions, Nvidia will continue to benefit from this secular structural change.