Rich enough to rival nations! NVIDIA becomes the only member of the "5 Trillion Club," with a weight exceeding nearly half of the S&P 500 companies combined

The Zhitong Finance APP noted that NVIDIA (NVDA.US) set a historical record last week, becoming the first company to reach a market value of $5 trillion. This is just a glimpse of its immense influence in the global economy.

This chip manufacturer, at the core of the artificial intelligence revolution, is not only the largest company by market value globally but may also become the most influential stock in Wall Street history.

Since the beginning of 2023, NVIDIA has been a major driver of the stock market rally, bringing substantial returns to shareholders and creating billions of dollars in wealth for CEO Jensen Huang. Its market value now exceeds that of six of the eleven sectors in the S&P 500 index, as well as the overall stock market size of most countries.

"From a historical perspective, this is clearly a huge anomaly, a once-in-a-generation spectacle," said Matt Miskin, co-chief investment strategist at Wanshin Investment Management.

Just last week, NVIDIA announced partnerships with Nokia, Samsung Electronics, and Hyundai Motor Group. Although the company will not release its financial report until mid-November, the recent performances of tech giants highlight its growth potential.

Companies like Microsoft, Amazon, and Meta have all committed to increasing their investments in the AI sector. According to their financial report data, the total capital expenditure of these four companies is expected to grow by 34% to approximately $440 billion over the next 12 months. These investments are key reasons driving NVIDIA's revenue expectations for the next fiscal year to reach $285 billion (up from just $11 billion in fiscal 2020).

All of this also explains why discussions around an AI stock market bubble are rampant, with NVIDIA at the center of the storm. Jensen Huang downplayed concerns about market frenzy at the annual GTC conference, and Federal Reserve Chairman Jerome Powell also denied comparisons to the late 1990s internet bubble.

"Such trends always reverse after reaching a critical point, and we expect that will ultimately happen," Miskin pointed out, "but currently, the profitability of core companies in the AI race remains the best, and the leadership change in the market requires this premise to change. There is indeed a risk of excessive concentration in the S&P 500 index."

The following five sets of data record NVIDIA's journey to a market value of $5 trillion, revealing its significant implications for the stock market:

NVIDIA's weight in the S&P 500 index exceeds that of six industry sectors.

As the world's largest company, NVIDIA naturally holds the highest weight in major stock indices weighted by market value. The stock accounts for 8.5% of the S&P 500 index, surpassing the total weight of the bottom 240 companies in the index.

Howard Silverblatt, a senior index analyst at S&P, stated that this is likely to set a record for constituent stock weight. Currently, the combined weight of the seven major tech stocks in the S&P 500 exceeds 36%, with Apple holding a 6.9% share

NVIDIA's market value exceeds that of most national stock markets

Data shows that NVIDIA's market value not only leads second-place Apple by about $1 trillion but also surpasses the total market value of the stock markets of the Netherlands, Spain, the UAE, and Italy. This chip company’s market value has now exceeded all stock markets globally, except for those in the United States, China, Japan, Hong Kong, and India.

Analysts most optimistic about NVIDIA believe its market value will approach $8 trillion

About 91% of Wall Street analysts give the stock a "buy" rating. HSBC analyst Frank Lee raised the target price to the highest on Wall Street at $230, corresponding to a market value of nearly $8 trillion. However, Harbor Global Securities analyst Jay Goldberg has consistently given a "sell" rating since April, with a target price of $100, the lowest on Wall Street, during which the stock has more than doubled.

NVIDIA's revenue growth stands out among many competitors

Typically, the expansion of a company's scale leads to a slowdown in revenue growth, but NVIDIA is an exception: revenue is expected to grow nearly 60% this fiscal year. Although this is a slowdown compared to the previous two years' growth rates of 126% and 114%, it still far exceeds the average growth rate of 6% for S&P 500 large companies, and is well above the expected growth rates for Microsoft (15%) and Apple (6.2%).

NVIDIA's rise has propelled Jensen Huang into the ranks of the world's top ten billionaires

According to the Bloomberg Billionaires Index, Jensen Huang's net worth has soared to $176 billion with the surge in stock prices, increasing by over $60 billion this year, placing him among the world's top ten billionaires. Documents from the U.S. Securities and Exchange Commission in October show that Jensen Huang holds about 3.5% of the company's shares through personal and family trusts