The S&P 500 is trading up 22 points, or 0.6%, to 4,236 shortly after the open. The Nasdaq was even stronger, up 1.1%.
The pace of gains is a 4% rally in Nvidia shares. The chipmaker’s market cap is now $1 trillion, and it joins Apple, Alphabet, Amazon and Microsoft in the club.
It’s a staggering valuation for a company that generated $26 billion in revenue in the last 12 months. It reminds us of these comments from the CEO of Sun Microsystems 2002:
“Two years ago, we were selling at 10 times the revenue when we were at $64. And at 10 times the revenue, to give you a 10 year return, I have to pay you 100% of the revenue for 10 years in a row in dividends. That’s assuming I can get that before Shareholders. This assumes I have zero cost of goods sold, which is very difficult for a computer company. This assumes no expenses, which is really difficult with 39,000 employees. This assumes I don’t pay any taxes, which is very difficult. This assumes you don’t You pay no taxes on your dividends, which is kind of illegal. That assumes that with no R&D for the next 10 years, I can maintain my current revenue run rate. Now, having done that, would any of you wish to buy my stock at a price $64? Do you realize how ridiculous these basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?”
More broadly, the market is optimistic about the debt ceiling deal. There are some warning signs though, with the focus on China’s suffering and the $3 drop in oil prices.