Nvidia pushes past $3 trillion

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Nvidia powers S&P 500 to record
The S&P 500 rose to a record after Nvidia crossed through the $3 trillion barrier for the first time and softer-than-expected jobs data raised hopes for an interest rate cut. The Nasdaq Composite also set a record, climbing almost 2%, with technology stocks Hewlett Packard Enterprises and CrowdStrike soaring on better-than-expected sales and earnings, respectively. The Dow Jones Industrial Average lagged behind, adding just under 100 points. The yield on the 10-year Treasury slipped, while U.S. oil prices rose from four-month lows.

Nvidia passes Apple
Artificial intelligence chipmaker Nvidia surpassed the $3 trillion market capitalization mark, pushing past Apple to become the second most valuable company behind Microsoft. Nvidia’s shares have risen 24% since its blockbuster earnings report in May, while Apple’s shares are up only 5% this year as sales growth stalled in recent months.

Baron backs Musk’s pay deal
Billionaire investor Ron Baron has publicly defended Elon Musk’s controversial $56 billion Tesla pay package. The Baron Capital chairman and CEO argues the package, tied to “aggressive” performance targets, is justified as without Musk “there would be no Tesla.” Baron previously revealed that his firm has made about 20 times its investment in Tesla since he first bought the stock in 2014. The package, previously voided by a Delaware judge, will face a shareholder vote on June 13.

Elliott retakes SoftBank stake
Elliott Management, an activist investor, has taken a $2 billion stake in SoftBank and is pushing for a $15 billion share buyback. This marks the second time Elliott has taken a stake in the Masayoshi Son-led firm. In 2020, at Elliott’s urging, SoftBank launched a $20 billion share buyback and asset disposal program. Elliott believes another buyback would boost SoftBank’s share price and signal confidence in CEO Son’s plans, particularly in AI.

Electric air taxi gets FAA signoff
Shares of Archer Aviation soared 6% after the Federal Aviation Administration granted the electric air taxi maker a key certification that would allow the company’s aircraft to eventually carry passengers. Archer, which has won orders and backing from United Airlines, is building electric vertical takeoff and landing aircraft for urban areas, which could reduce carbon emissions. Archer has partnered with automaker Stellantis to produce hundreds of the electric air taxis.

[PRO] Buy the dip
While investors are concerned about this biotech company’s potential loss of exclusivity and rising competition, Goldman Sachs sees an upside of more than 60%. The Wall Street bank believes investors should buy the dip and consider its “overlooked” pipeline. 

Billionaire investor Ron Baron’s support of Elon Musk‘s $56 billion compensation package almost feels like looking in the rearview mirror. Nonetheless, it’s a crucial intervention just ahead of next week’s vote on what would be corporate America’s biggest compensation package.

Shareholder advisory firms, Glass Lewis and ISS, have told investors to reject the award. In voiding the original package, the judge said the process was flawed because of the close relationship the compensation committee had with Musk. For example, Robyn Denholm, the chair of Tesla, sold some of her Tesla options for $280 million between 2021 and 2022 — a “life-changing” transaction, as she described it. Other members of the team had relationships with Musk going back 15 years or more and regularly vacationed together.

The package has no salary or cash bonus and sets rewards based on Tesla’s market value rising to as much as $650 billion over the 10 years from 2018. The court also found the defendants did not prove the package was necessary to retain Musk.

At its height, Tesla reached a market capitalization of $1.2 trillion in November 2021. Since then, the EV market has slowed and competition has intensified. Its current market cap is $560 billion. While Baron remains bullish and has made and expects to make a lot more money from Tesla, other investors expect the company’s stock to fall by as much as 30%.

Who would bet against Musk? He took a niche vehicle manufacturer that has flirted with bankruptcy and challenged Detroit, and now plans to reinvent the EV maker into a leader in AI and robotics.

Still, Wall Street has a new favorite in Nvidia. It passed the $3 trillion mark and surpassed Apple to become the second most valuable U.S. company. Before Thursday’s record high, UBS noted that Nvidia’s year-to-date gain is responsible for a significant chunk of the S&P 500’s 2024 rally.

“NVDA accounts for 30% of the market’s return YTD,” wrote strategist Jonathan Golub in a Wednesday note to clients. “S&P 500 returns drop from 11.3% to 7.8% ex-NVDA. Many stocks have moved in step with the AI theme.” 

While some caution a bit of profit-taking, the company’s 10-for-1 stock split should encourage side-lined retail investors to take a slice of the AI frenzy. Bank of America still sees an upside to the stock.

— CNBC’s Brian Evans, Alex Harring, Darla Mercado, Kif Leswing, Rohan Goswami, Leslie Josephs and Yun Li contributed to this report.