Stock price of NVIDIA, the leader in artificial intelligence (AI) chips, surged by nearly 7% last night. The stock price surpassed the $1,100 mark, and the market capitalization (market cap) soared to 2.801 trillion Won. The market is keenly focused on how high the NVIDIA stock price will reach. 

According to the New York Stock Exchange (NYSE) on May 28, NVIDIA closed at $1139.01 (1.53 million Won), up 6.98% from the previous trading day. NVIDIA’s tock price surpassed the $1,000 mark for the first time on May 23 after its earnings and stock split announcement. The stock price continued its upward trend, breaking its record high close for three consecutive trading days. 

The market cap also increased significantly. After surpassing $1 trillion in June 2023, the market cap of NVIDIA surpassed $2 trillion in just over 10 months. Now it is on the verge of reaching the $3 trillion mark. The gap between Apple, the second-largest company by market cap at $2.913, is only around $100 billion. 

The primary driver behind the upward trend of NVIDIA was its Q1 performance. NVIDIA reported an earnings surprise that exceeded market expectations and also provided a strong revenue for Q2 as well. 

Additionally, the news of the stock split scheduled for next month also fueled the rise in the stock price. NVIDIA stock will undergo a ten-for-one forward stock split on June 10, three years after the most recent stock split which happened on July of 2021. 

Stock splits typically lower the stock price, making it easier for individual investors to purchase shares, and thereby acting as a catalyst for increase in stock prices. 

According to a Bloomberg report citing data from Bank of America (BoA), stock prices of American companies which undergone stock splits surged by an average of 25.4% over the following 12 months. Considering the average stock market return of 12%, it is more than double the average rate.

Wall Street is also optimistic about NVIDIA’s future, raising the target price to $1,400. 

The rise in NVIDIA’s stock price was also fueled by positive news from Tesla. News broke out last night that AI startup xAI founded by Elon Musk, the CEO of Tesla, successfully secured $6 billion in funding, and the market expects that NVIDIA will benefit from this development. 

xAI announced on May 27 that it had successfully secured $6 billion (approximately 8.178 trillion Won) in funding. Musk recently stated that around 20,000 of NVIDIA’s latest H100 graphics processing units (GPUs) would be needed to train ‘Grok-2.0’. 

As a result of the surge in NVIDIA’s stock price, the technology stock-focused NASDAQ Composite Index closed at 17,019.88, up 99.09 points (0.59%). 

The prevailing view of the market is that NVIDIA’s stock price will continue to rise for the time being amid these favorable factors. However, some analysts warn of a decline in stock prices from profit taking trades in the short term. 

Some analysts predict that further upward rallies might be difficult. Research firm DA Davidson expects that the upward rally of NVIDIA is nearing its limit. 

Gil Luria, a DA Davidson analyst, commented, “The revenue structure of NVIDIA will be impacted as the big tech companies such as Meta, Alphabet, and Amazon develop their own AI chips,” adding “They are currently performing well due to its market share, but its position will weaken over time.”

He added, “While the short-term outlook of NVIDIA is remarkably bright, its long term outlook is quite bleak. The target price for 2026 is $900, suggesting a steep decline of more than 20% over the next 18 months.” 

Written by Hong Saet Byul

Translated by Lee Dong Jae