Good morning to everyone — especially Nvidia shareholders.

I always liked the idea that every overnight success is a decade in the making.

In the case of Nvidia, it’s been three.

Shares of Wall Street’s favorite tech stock gained 5.2% on Wednesday to become the second-most valuable public US company, just behind Microsoft.

The semiconductor darling helped the S&P 500 and Nasdaq notch new records on Wednesday.

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Nvidia’s dominance makes sense

Nvidia seems to give investors new reasons to celebrate every other week.

On Wednesday, shares of the semiconductor giant closed at $1,224.40, putting it squarely in the $3 trillion market capitalization club, sandwiched between Apple and Microsoft. 

Nvidia was last worth more than Apple before iPhones existed, back in 2002.

At its current trajectory, it won’t be long before it overtakes Microsoft to become the world’s most valuable company.

This year, Nvidia stock has gained 154% — an eye-watering ascent in any context, but it’s particularly notable given that Jensen Huang founded the company more than three decades ago. 

A few reasons why Wall Street can’t get enough Nvidia:

It’s hard to think of a bigger beneficiary to the artificial intelligence boom than Nvidia. 

And if the present moment marks just the start of a technological revolution centered on AI, as many believe, no firm is better positioned to capitalize than Nvidia. 

The team at Bank of America, for one, holds a street-high price target of $1,500.

One reason, according to BofA analyst Vivek Arya, is that Nvidia has three teams working in parallel at any given point, each with a distinct focus:

“Despite claims by rivals (AMD, Intel, custom chips or ASICs) we see NVDA with a multi-year lead in performance, pipeline (Blackwell, successors), incumbency, scale and developer support (5mn+),” Arya wrote in a note to clients Wednesday.

While Nvidia stands alone as far as stock performance, the semiconductor sector as a whole has been on an unusual hot streak in its own right. 

Since 2002, semi stocks have been about neck and neck with software stocks over any given year-long stretch.

In the last 12 months, however, semis have obliterated software by 47 percentage points, according to DataTrek Research.

It is indeed statistically unusual, but it’s not so surprising when you consider what Nvidia and its competitors are building and shipping.

“Nvidia and other hardware providers are monetizing Gen AI right now with new, very high margin products,” said DataTrek co-founders Nicholas Colas and Jessica Rabe.

“Software companies are buying those chips but do not yet have the revenue streams from new, Gen AI-enabled services. And it will be some time — most likely measured in years — before new enterprise AI is a meaningful contributor to software company margins.”

Is Nvidia part of an AI bubble in the stock market? Hit reply to this email or let me know on X @philrosenn.

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