Is Nvidia really worth $4tn?

Katie Martin (0:06)

Pushkin. Here's a company we haven't chatted about here for a little while, Nvidia. It's a chip maker. It's basically the artificial intelligence trade, and it's now worth, wait for it, a little over $4 trillion. That's trillion with a T, folks. And for reference, the entire FTSE 100 index in the UK is under $3 trillion. What the hell? So, it looks like the whole AI hoopla is alive and well in financial markets, that's for sure. So why is it that whenever I see something that's AI generated, it's rubbish? Today on the show, we're asking, is this a lot of money riding on a wing and a prayer, or is this technology the real deal? This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a dinner markets columnist here at FT Towers in London. And I'm joined by one of the youngsters on the Unhedged newsletter who makes Rob look clever, Aiden Reiter.

Aiden Reiter (1:11)

Hello.

Katie Martin (1:12)

Now, Aiden, one of the challenges with talking about AI is that lots of normal people don't really know what it is and we don't really understand how technology works or what it's going to do. So a very confusing thing for us to be talking about today, but we're going to try.

Aiden Reiter (1:30)

Yeah, we're just going to not know, but we'll keep on going.

Katie Martin (1:32)

You've got to love that. That's the Unhedged Podcast way. So let's start with a little bit more on Nvidia. I mean, like two years ago, it was worth a measly $1 trillion. Who cares about that? But it's just like so, like, it's just unholy how massive this thing is now. The shares are up about 40% since early May. Like, why has it just rocketed like this lately?

Aiden Reiter (2:02)

I mean, it's interesting that it's rocketed like this, given that just, what, six months ago, we weren't sure it had any future. After DeepSeat came out and proved that you could make these complicated AI models with the lower grade chips, so not the chips that Nvidia says will build the future, its stock plunged, I think, 17% in a day, or, you know, at least in the teens. And then, of course, within two days, it was back up, because it was very clear that-

Katie Martin (2:26)

This is when China came out with its own version, effectively.

Aiden Reiter (2:30)

A Chinese company, DeepSeek, created a model using lower grade chips. So the chips that are not the fancy dude ads that Nvidia has hawked, saying this is the future of AI, and they did it for, you know, relatively cheap. There's a lot of debate on whether or not the numbers they gave are actually accurate. But the point is that a lot of people doubted whether or not you really needed such advanced chips in order to make complicated models that do the work that AI is supposed to do. But the market has clearly forgotten that, because despite that concern, all the big tech companies that are buying Nvidia's chips and plowing them into data centers have continued to do so, and have done so at a very rapid rate.

Katie Martin (3:09)

I think there's also a sense that back in January, AI stocks were so richly valued, right? They were so expensive that they'd had such a great run that it only took a little bit of kind of bad-ish news in the form of a new Chinese competitor, that the shares took a really big hit. And then, of course, a little bit later on, we had the big shakeout in US markets that came from Trump's massive Liberation Day tariffs. And so everything was just terrible for a little while in AI and in big tech for a few weeks there. So, you know, again, it did, it just sprung back incredibly quickly.

And, you know, this is about numbers from Nvidia, right? This isn't just kind of, oh, you know, trust us, we're massive and important. The earnings back it up.

Aiden Reiter (3:56)

Yeah, I mean, the earnings are incredible. They've successfully sold a lot of chips to these data centers because people really believe that AI is the future. These, the companies that have benefited so much from the quote unquote AI hype continue to hype up the product. And at the same time, as you were saying before, the market is continuing to buy it and, you know, continuing to ride the momentum, but people are jittery. They're expensive stocks. I mean, their PE ratios are very, very high.

Katie Martin (4:20)

That's the price earnings ratios, which is how much investors are prepared to pay for future earnings that they think the company is going to make. But let me tell you someone who is convinced that Nvidia is the real deal, and that's its chief executive, Jensen Wang. Now, I can't remember if I've mentioned this on the show before, but like at a certain point last year, I was on a panel session with a couple of people from the Irish tech scene, and they were saying, we remember when Jensen Wang was just like some guy who would turn up to the same tech conferences that we did, and he was such a nerd and so unimportant that he didn't even get invited to the best parties. And now, they're doing panel sessions with me in a pub in Ireland, and Jensen Wang is running a company that's worth $4 trillion.