There will be chips off the Nvidia block

Nvidia's dash to a $4 tn value on Wednesday is awe-inspiring in a world yet to be shaped by AI. Investors haven't lost their heads over the chipmaker, though, the stock is trading at a price-to-earnings multiple lower than Tesla's. But the sprint raises the odds of a crash if earnings expectations become unmanageable. Those risks made a brief appearance earlier this year, as Chinese AI startup DeepSeek developed a large language model at a fraction of the market's reckoning of the required computing power. Trade wars are fragmenting the semiconductor industry, and rivals to Nvidia's advanced chips could emerge sooner than anticipated. Chinese EV makers have pinned Tesla to the ropes - an outcome Nvidia's investors may ignore to their peril. Finally, AI is yet to make money for most businesses, which may slow its adoption. At its peak, Cisco was valued even more fancifully as it stitched up the internet - but sanity eventually prevailed.

For now, Nvidia remains the master builder and commands its due. Its biggest customers - Alphabet, Amazon, Meta and Microsoft - are spending prodigiously on their AI infrastructure. The US is trying to stay ahead in the AI race by controlling the export of Nvidia chips. Country quotas are being threatened to open markets for US merchandise. Jensen Huang is pitching the idea of sovereign computing to reduce dependency on global tech giants. Nvidia is the rallying point for an unprecedented tech-driven surge on Wall Street. Yet, the stock is not as widely held by funds as other large tech companies. So, there is still scope for more buying interest in the chipmaker.

Computing power has become a currency like gold or oil, with spillover strategic effects. Nvidia's moat has certainly widened, but unlike natural resources, chip manufacturing is at an inflection point - and its growth is bound to be shared. Attaining monopoly power is easier than holding on to it. One can only be in the right place at the right time temporarily.