Wall Street is watching patiently as chip giant Nvidia (NVDA) continues to power toward claiming the spot as the first company to close out a trading day with a $4 trillion market cap. The AI leader topped the mark during intraday trading on Wednesday, briefly crossing the threshold before retreating and closing the day below the all-time high.
Nvidia has been on a tear this year, with shares climbing 21% both year-to-date and over the last twelve months. This despite the company facing serious headwinds in January over fears that China’s DeepSeek meant that AI firms would no longer need to purchase high-priced chips to train their AI models.
DeepSeek claims that it trained its R-1 model on less than top-of-the-line Nvidia chips, upending the prevailing thinking that the best way to train powerful AI was with powerful chips. That sent shares of Nvidia cratering, cutting $600 million from its market cap.
At the same time, concerns that AI companies were moving away from training AI models to inferencing, or deploying them in apps, and therefore could use less powerful, and less expensive chips, began to creep into the conversation.
But so far, both of those theories have proven wrong. Nvidia’s chips are still among the best for training AI models, and the industry has shown that inferencing benefits from more powerful AI processors, as they allow the software to answer complex questions more quickly.
While the company continues to benefit from so-called hyperscalers, major cloud providers like (AMZN), Google (GOOG, GOOGL), and Microsoft (MSFT), powering slightly less than 50% of its sales, Nvidia is also leaning further into soveriegn, or AI data centers that allow countries to use their own AI services rather than rely on those abroad.
The company is expected to supply hundreds of thousands of chips to countries including Saudi Arabia and those across Europe.
Additionally, Nvidia has managed to shake off the Biden and Trump administrations’ bans on the sales of its chips to China. While the company took a massive $4.5 billion hit to its bottom line in its most recent quarter due to the ban and anticipates a larger $8 billion writedown in the current period, its stock price continues to climb.
The competition, meanwhile, is still far from stealing Nvidia’s lead. AMD (AMD) and Intel (INTC) make up a small percentage of the AI data center market, and while Amazon, Google, and Microsoft have deployed or are developing their own AI chips, their customers will also still want access to Nvidia’s offerings.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X/Twitter at @DanielHowley.
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