Nvidia (NVDA) has achieved a significant milestone by becoming the first chip company and the seventh U.S. firm to join the elite trillion-dollar club. With a market value of around $1 trillion, Nvidia’s recent surge can be attributed to its dominance in the field of artificial intelligence (AI).

Currently trading at approximately $408 per share, Nvidia must maintain a share price above $404.86 to retain its membership in the trillion-dollar club, which includes tech giants like Apple (AAPL), Amazon (AMZN), Google-parent Alphabet (GOOGL), and Microsoft (MSFT).

The company’s remarkable rally has been fueled by the growing excitement surrounding AI. In fact, Nvidia shares have seen a continuous uptrend, reaching new record highs as the company forecasts its revenue in the current quarter to surpass analysts’ expectations by approximately $4 billion. This surge is largely driven by the increasing demand for chips that power AI applications.

On Thursday, Nvidia’s stock received a substantial boost, adding roughly $184 billion in market value in a single day. The rally has since continued, with Nvidia poised to achieve its best three-day performance in over two decades, according to Dow Jones Market Data.

Furthermore, Nvidia’s announcements at the COMPUTEX conference in Taipei have generated additional enthusiasm. The unveiling of a new supercomputer expected to enable the next wave of generative AI applications has further bolstered investor confidence in the company.

It’s worth noting that Nvidia has already had an impressive year, with its shares more than doubling in value thus far in 2023.

However, sustaining its current valuation will depend on several factors. It’s not uncommon for newly minted trillion-dollar companies to lose their status after reaching the milestone. Tesla (TSLA) and Meta Platforms (META), the parent company of Facebook, have both experienced a decline in value since entering the trillion-dollar club. Similarly, Apple, Amazon, Alphabet, and Microsoft initially fell in value after achieving this feat but managed to regain their market values over time.

Nvidia’s stock is also considered relatively expensive, ranking as the third-most expensive stock to cross the trillion-dollar mark. Currently trading at around 51 times the estimated 2024 calendar year earnings, it compares to Tesla, which traded at over 140 times earnings, and Apple, which had a relatively modest valuation of 17 times earnings when they initially reached this milestone.

Analysts anticipate Nvidia to earn approximately $9.70 per share in 2024, according to FactSet, a significant increase from the previous estimate of $6 per share. Achieving these projections will heavily depend on the sustained investment in AI by other companies.

Nvidia’s monumental achievement aligns with a broader rally in semiconductor and AI-based stocks. Companies such as C3.ai (AI) and Palantir Technologies (PLTR) experienced significant gains on Tuesday, while Broadcom (AVGO) and Advanced Micro Devices (AMD) also saw notable increases in their stock prices.

The surge in AI-related stocks has contributed to the strong performance of the Nasdaq Composite, which has gained approximately 25% this year. In contrast, the Dow Jones Industrial Average, with fewer AI-focused companies, has experienced a decline of around 0.6%.

As Nvidia continues to push the boundaries of AI technology, its trillion-dollar valuation signifies a significant achievement and solidifies the company’s position as a key player in the semiconductor industry.