The S&P 500 is trading higher by 22 points, or 0.6%, to 4236 shortly after the open. Even stronger is the Nasdaq, which is up 1.1%.
Pacing the gain is a 4% rally in Nvidia shares. The chipmaker now has a $1 trillion market cap, joining Apple, Alphabet, Amazon, and Microsoft in the club.
It’s an eye-watering valuation for a company with $26 billion in revenue in the past 12 months. It’s reminiscent of these comments from the CEO of Sun Microsystems 2002:
“2 years ago we were selling at 10 times revenues when we were at $64.
At 10 times revenues, to give you a 10-year payback, I have to pay you
100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero
cost of goods sold, which is very hard for a computer company. That
assumes zero expenses, which is really hard with 39,000 employees. That
assumes I pay no taxes, which is very hard. And that assumes you pay no
taxes on your dividends, which is kind of illegal. And that assumes with
zero R&D for the next 10 years, I can maintain the current revenue
run rate. Now, having done that, would any of you like to buy my stock at $64? Do
you realize how ridiculous those basic assumptions are? You don’t need
any transparency. You don’t need any footnotes. What were you thinking?”
More broadly, the market is upbeat about the debt ceiling deal. There are some warning signs though with China struggles in focus and oil down $3.