Nvidia (NVDA 4.36%) just achieved something no other company ever has: It reached a market value of $4 trillion last week, pushing ahead of Microsoft and Apple. Until recent times, those tech giants periodically held the position of world's most valuable company, though they remained under the $4 trillion level. It's not too surprising that Nvidia became the first to reach this milestone, considering the growth of artificial intelligence (AI) and Nvidia's spot in the field.
This tech company became a mover and shaker in the industry early on, developing graphics processing units (GPUs) specifically to handle AI workloads and launching a wide range of other related products and services too. The effort quickly bore fruit, helping Nvidia's annual revenue to surge to $130 billion from $27 billion just two years earlier.
Share performance, and therefore market value, followed, with the stock advancing 1,400% over the past five years. Now, it's logical for investors to wonder what's next for Nvidia. Will the stock continue to climb after reaching $4 trillion? History offers us a strikingly clear answer.
Image source: Getty Images.
Nvidia's wide net
Before leaping in, though, let's zoom in on the Nvidia story so far. As mentioned, the company's focus on GPUs, or chips, and other products specifically for AI was a smart strategic decision. The AI market today is worth about $300 billion and analysts expect it to reach beyond $2 trillion just a few years down the road. Nvidia is well placed to benefit as it has cast a wide net, with the ability to sell AI products to customers across industries and at any point along their AI path.
On top of this, Nvidia always has put an emphasis on innovation and excellence: It aims to consistently offer the world's top-performing chips -- and improve them on an annual basis. The company has announced its innovation plans through 2028 and now is rolling out Blackwell Ultra, the upgrade following the release of the original Blackwell this past winter.
All of this has resulted in not only stellar revenue growth but also high profitability on sales as we can see through Nvidia's gross margin figures -- they generally have remained above 70%, and the company predicts this will continue.
This earnings performance along with a bright outlook for the AI market has helped Nvidia shares to roar higher and reach this latest market cap milestone. Now, let's return to our question and consider whether Nvidia will advance after reaching $4 trillion. And to do this, we'll look at clues that history offers us.
Market cap milestones
Nvidia has reached several market cap milestones over the past two years. They are as follows:
| Date | Market Cap Milestone | Stock Performance in Month to Follow |
|---|---|---|
| June 13, 2023 | $1 trillion | +12% |
| Jan. 24, 2024 | $1.5 trillion | +28% |
| March 1, 2024 | $2 trillion | +9% |
| June 12, 2024 | $3 trillion | +3% |
Data source: YCharts.
History suggests Nvidia could advance over the coming month as it's done after reaching market cap milestones in the recent past. And the general trend has been positive since the company reached $1 trillion in market value in June 2023. Since then, the stock has advanced about 300%.
Of course, it's important to remember that history doesn't always dictate what will happen next. Stocks and the general indexes have been known to surprise investors, and any unexpected corporate or macroeconomic news could impact what direction a particular stock takes. Another key point is, though it's great to register a gain in a short time period, such as a month, what we're really interested in is holding on to stocks for the long term. You're much more likely to reap bigger rewards by choosing a quality player at a reasonable price and holding on for the long haul as its business develops.
And the great news here is Nvidia makes a fantastic long-term investment, thanks to its leadership in a high-growth area, commitment to innovation, and much more. Meanwhile, if history is right, Nvidia also could roar higher in the short term after becoming the most valuable company in the world.
