Nvidia (NVDA -3.16%) just become the first company in history to reach a $5 trillion market capitalization. News that the artificial intelligence (AI) hardware leader is teaming up with Oracle to create an AI supercomputer for the U.S. Department of Energy has provided another valuation boost for the company and helped push it past the valuation milestone.
Nvidia's market cap has also gotten a big boost recently thanks to comments from President Donald Trump and administration officials suggesting that the U.S. and China could be on the verge of reaching a trade agreement. If a trade deal between the competing world powers were to materialize, it could be a major positive catalyst for Nvidia. A de-escalation of tensions between the two countries could help take some key geopolitical risks off the table for Nvidia. It could also allow the AI hardware leader to reestablish its business in the Chinese market and tap back into potentially massive growth opportunities there.
As it stands right now, everything seems to be falling bullishly into place for the AI pioneer.
Image source: Nvidia.
Nvidia seemingly can't stop making history
Nvidia's run over the last five years has been nothing short of incredible. The company's share price skyrocketed roughly 1,530% across the stretch.
NASDAQ: NVDA
Key Data Points
More than any other hardware, Nvidia's graphics processing units (GPUs) are at the heart of the artificial intelligence revolution. The company's CUDA software platform is also helping developers get the most out of processors and keeping creators locked into its ecosystem. Strengths in hardware and software have also helped Nvidia branch into offering AI processing as a service, and the tech leader is making some big plays in the robotics, autonomous vehicles, and Internet of Things categories.
Thanks to the cutting-edge nature of its technologies and strong demand, Nvidia has been able to maintain stellar gross margins. While the company's business was historically somewhat cyclical, the rise of AI has created a secular growth tailwind. Along with margins that have remained resilient at unusually high levels, stellar sales growth has kept the company's earnings soaring quarter after quarter.
While competitors including AMD have gained some ground and won notable contracts with major artificial intelligence players including OpenAI and Amazon, Nvidia retains a clear-cut lead in the market. With the possibility that AI will unlock compounding competitive advantages, large tech-sector clients are faced with a seemingly obvious choice -- spend big on top-tier hardware capable of powering breakthrough innovations or risk getting left in the dust.
