Nvidia’s wild ride and induction into the $2 trillion market cap club in two charts

Published Fri, Feb 23 20241:34 PM ESTUpdated Fri, Feb 23 20244:39 PM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

The $2 trillion club has a new member: Nvidia . The leading artificial intelligence chipmaker's market capitalization briefly topped $2 trillion on Friday, becoming only the third U.S. company in history to do so; it closed the session worth $1.94 trillion. Fellow Club names Apple and Microsoft are the others. Apple became the first, in August 2020. Less than a year later, in June 2021, Microsoft entered the rarefied air. Both companies later breached $3 trillion in market valuation, but, as of Friday, only Microsoft remains above it, at roughly $3.07 trillion. Apple's market cap stands at around $2.8 trillion. Nvidia's blistering ascent to $2 trillion has been fueled by Wall Street's AI optimism — though skeptics may decry it as euphoria. After more than tripling in 2023, Nvidia's stock has soared nearly 60% already in 2024. Nvidia is the best-performing stock in the S & P 500 this year, as it was in 2023. Nvidia's latest leg higher — up 16.4% on Thursday, in the biggest one-day market cap gain on record, and an early Friday pop — follows the company's stellar earnings report Wednesday evening as demand for its AI chips remains fervent. The quarterly results and guidance blew away sky-high expectations, calming the nerves of investors who dumped the stock in the run-up to the release. On Tuesday and Wednesday, Nvidia shares had tumbled 4.4% and 2.8%, respectively, amid a four-session losing streak. In February alone, Nvidia's market cap has swelled by nearly $500 billion. In other words, in just a few weeks its value has grown by a sum larger than Exxon Mobil , which just over a decade ago had been the world's most valuable company. The oil and gas giant's market cap Friday is about $412 billion. In late January the expectation on Wall Street was Alphabet would be the next U.S. company to eclipse $2 trillion , but disappointing fourth-quarter advertising revenue halted the Google parent's quest. Alphabet was worth around $1.8 trillion Friday, just shy of Amazon's $1.82 trillion valuation. NVDA 5Y mountain Nvidia 5 years As jaw-dropping as Nvidia's stock chart appears, even a cursory glance at its profit-and-loss statement will help contextualize the move. The dominant maker of AI chips has experienced a financial windfall since the launch of OpenAI's ChatGPT in late 2022. The viral chatbot — trained on Nvidia's cutting-edge processors and backed by Microsoft — showcased the potential of generative AI. That opened up the floodgates to billions of dollars of investment into the technology. In the 12-month period ended in January, Nvidia's revenue more than doubled, to $60.92 billion from $26.97 billion. On a non-adjusted basis, its net income jumped by an extraordinary 581%, to $29.76 billion from $4.37 billion. Due to Nvidia's explosive earnings growth — accompanied by upward revisions to analyst estimates — its stock is actually cheaper Friday on a valuation basis than it was a year ago. It trades around 31.5 times forward earnings, compared with 52.6 on Feb. 23, 2023, according to FactSet data. At that time, Nvidia's market cap stood at $583.5 billion. (Jim Cramer's Charitable Trust is long NVDA, AAPL, MSFT, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Jensen Huang, CEO of Nvidia, arrives for the Inaugural AI Insight Forum in the Russell Building on Capitol Hill on Sept. 13, 2023.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

The $2 trillion club has a new member: Nvidia.