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 a valuation model usually gives them a lower discount rate than a riskier company would get, though still meaningfully above what a safe government bond yields.