Nvidia set to top $2 trillion valuation in first for chipmakers

By Subrat Patnaik | Bloomberg

Santa Clara-based Nvidia Corp. is set to become the first semiconductor firm with a $2 trillion valuation, another milestone in its ascendancy as the biggest beneficiary of a rush into artificial intelligence-related stocks over the past year.

The chipmaker’s shares rose as much as 2.7% in premarket trading on Friday after closing at a $1.96 trillion valuation in the previous session. The gain will cement Nvidia’s position as the world’s fourth-most valuable company after rallying 59% since the beginning of the year, with a market capitalization that’s only behind those of Microsoft Corp., Apple Inc. and Saudi Aramco.

Nvidia shares surged after it reported blowout results that reaffirmed Wall Street bets on the potential for its artificial intelligence technologies. The chipmaker also gave guidance above expectations, driven by AI spending at its biggest customers, including Meta Platforms Inc.

Nvidia dominates the market for graphics chips designed for complex computing tasks needed to power AI applications that companies are rushing to develop.

Shortsellers on losing end

The surge on Thursday also left short sellers with about $3 billion in paper losses, according to an analysis by S3 Partners LLC, which called it an “AI-generated nightmare” for bearish traders.

The mark-to-market losses are another blow for contrarians who argued that Nvidia’s sky-high valuations and speculative fever had all the makings of a market bubble about to pop. The chipmaker is the third-largest US short with $18.3 billion of shares that have been borrowed and sold, according to S3.

“The early mark-to-market losses were inescapable for many short sellers that were looking to trim their positions after NVDA’s earnings report,” Ihor Dusaniwsky, managing director of predictive analytics at S3, wrote in the note. “Short sellers will probably wait a bit to look for more favorable exit points.”

The rally in Nvidia sparked broader gains across the US chip industry. Short sellers had a one-day paper loss of $4.3 billion from semiconductor stocks, S3 data showed. Semiconductors are the worst-performing sector for short sellers this year, with mark-to-market losses of $7.2 billion in February.

Some investors say Nvidia’s blockbuster earnings will cement optimism that AI spending is strong, justifying the big stock market gains.