Nvidia could join the $1 trillion stock club. How much should you earn.

Nvidia may become the world’s first trillion-dollar chip stock. But it is not clear when it will reach this high.

Shares of Nvidia (Stock ticker: NVDA) rose 24% Thursday after an earnings release and guidance that was described as “incredible,” “unfathomable,” and “the biggest hit ever.”

This is not an exaggeration. Nvidia reported first-quarter earnings of $1.09 per share, beating expectations of 92 cents, while providing second-quarter revenue guidance of $11 billion, nearly $4 billion more than expectations of $7.15 billion.

Furthermore, the routing boost does not seem to result from a one-off increase in demand for chips powerful enough to handle AI. On the company’s earnings call, Colette Criss, Nvidia’s chief financial officer, said, “Generative AI has dramatically increased demand for our products, creating broad global growth and opportunity across our markets,” and that the company is already taking steps to achieve peak demand during the second half of the year. Nvidia’s fiscal year.

The strong demand should push gross margins above 70% during the second quarter, up from 66.8% during the first quarter, which Susquehanna analyst Christopher Rowland attributes to the H100 card that can “accelerate large language models … by an incredible 30-fold compared to generation.” The former cost $20,000.

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Finally, Rowland says Nvidia’s four segments — automotive, data center, gaming, and professional visualization — could grow at at least three times the rate of semiconductors overall. “It looks like the new gold rush is upon us, and Nvidia is selling all the picks and scoops,” Rowland wrote. He raised his price target for the stock to $450 from $350.

Recent gains in both stocks and business give Nvidia an opportunity to do something no other chip company has ever done — surpass $1 trillion in market capitalization. Intel (INTC), which fell on Thursday, peaked at $501.51 billion in August 2000 — $901.30 billion in today’s dollars — while Taiwan Semiconductor Manufacturing (TSM) peaked at $642.1 billion in January 2022. After Thursday’s gains, Nvidia was valued at $939.3 billion, based on a stake of $2.473 billion. That puts it $60.7 billion short of the $1 trillion mark, a level that could be reached if the stock reaches $404.86, more than 6% from today’s close of $379.80.

It’s not just chip stocks that have struggled to reach the trillion-dollar mark. Only six US stocks crossed that threshold — Apple (AAPL), Amazon.com (AMZN), Alphabet (AMZN), Microsoft (MSFT), Meta Platforms (META) and Tesla (TSLA) — and neither Tesla nor Meta were able to survive. there. Getting to $1 trillion is important.

Rajvendra Gill, an analyst at Needham, saw that return in 2021, though it’s been a bumpy ride since the call. Nvidia shares fell 50% last year as technology stocks were hit by higher Fed rates and slowing growth. But the demand for Nvidia’s products comes from everywhere: big tech companies like Microsoft

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and Amazon.com; internet companies like Meta; And even biotech companies like Amgen

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(AMGN), to name a few.

“We see virtually all of the past headwinds behind us, and we expect the company to ship to AI-related real demand, in the near term,” wrote Gill, who has a price target of $460 per share. “While there [were] Some highs and lows in interim years, we think NVDA is positioned to achieve that rating over time.”

But how high can Nvidia really go? In the short term, maybe not too far. Katie Stockton, founder of Fairlead Strategies, notes that a stock move higher on Thursday will generate sell signals on a weekly and daily basis. “This suggests a possible short-term peak in the long-term uptrend,” she wrote.

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But then who knows?

Write to Ben Levisohn at ben.levisohn@barrons.com

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