Blue chip

A blue chip is a large, well-established company with a long track record of stable performance, often a household name. The term borrows from poker, where the blue chip is traditionally the highest-value chip on the table.

Blue chip stocks are generally seen as lower-risk than smaller or newer companies, since their business is proven and their cash flows are more predictable. That predictability is why they are often used as a reference point for a conservative discount rate in a valuation model, closer to what a safe government bond currently yields than to the higher rate a speculative business would need.