Move over, Microsoft and Apple. There is a new king in the stock market.
Nvidia on Tuesday surpassed two of the biggest names in technology to become the world’s most valuable publicly traded company, according to data from S&P Global. The rise has been fueled by the boom in generative artificial intelligence (AI) and surging demand for the company’s chips, known as graphics processing units (GPUs), that have enabled the creation of AI systems.
Nvidia’s rise is one of the fastest in market history. Just two years ago, the company’s market value was just over $400 billion. It has now grown from $1 trillion to over $3 trillion in just one year.
Nvidia’s stock rose 3.6% on Tuesday, raising its value to $3.34 trillion. Microsoft and Apple both fell, ending the day behind Silicon Valley chipmakers.
Nvidia’s rise is proof of how much artificial intelligence has shaken up the world’s largest companies. With the emergence of powerful technologies, Microsoft surpassed Apple in January to become the number one market capitalization company, and Nvidia later took the throne. Last week, Apple also said it was getting into the AI game and would add the technology to its products, including the iPhone, this fall.
Years before other big chip companies, Nvidia’s CEO Jensen Huang was convinced that GPUs would be essential for building artificial intelligence, and he tailored the company to align with what he believed would be the next technology boom.
His big bet is paying off. By some measures, Nvidia controls more than 80% of the market for chips used in AI systems. Nvidia’s biggest customers regularly jockey for orders for chips to run computers in its giant data centers, and the company is building its own AI chips to avoid being too dependent on one vendor.
“No one has fully seen or evaluated this,” said Daniel Newman, CEO of technology research firm Futurum Group. “They saw the trend, they built around the trend, and they activated the market. You can effectively charge whatever you want.”
Nvidia’s rise has made Hwang, 61, a household name in the tech world. After a computer conference in Taiwan earlier this month, he was surrounded by attendees wanting autographs, including a woman who asked for an autograph on his chest.
The company’s rise is reminiscent of dot-com era giants such as Cisco and Juniper Networks, which built equipment to run communications networks for the Internet. Cisco’s stock price increased more than 1,000 times between its 1990 and 2000 IPOs, briefly making it the most valuable company in the world.
The rate at which Nvidia’s value has grown has been astonishing. Apple surpassed $1 trillion in August 2018 and became the first $3 trillion company in June last year. Even Microsoft took almost five years to grow from $1 trillion to $3 trillion.
Nvidia’s investors are betting more on its potential than its current profits. Microsoft and Apple each generated profits of more than $21 billion in the three months through March. Nvidia generated $14.88 billion in revenue in its most recent quarter, which ended in April, a more than 600% increase from the same period last year.
“The numbers are growing so quickly that people are worried: Is this sustainable?” said Stacy Rasgon, an analyst at Bernstein Research. “If the returns from AI turn out to be non-existent, everything will fall apart.”
Since the index was created in 1926, 12 companies have led the market valuation of the S&P 500, including AT&T, Apple, Cisco, DuPont, Exxon Mobil, General Electric, General Motors, IBM, Microsoft, Philip Morris, Walmart, and now NVIDIA. am. S&P Dow Jones Indices.
Nvidia’s rise has been fueled by its ability to consistently exceed Wall Street expectations. Last quarter, revenue tripled from the same period last year to $26 billion. We also expect our sales to double this quarter.
Nvidia sells everything from chips and the software needed to build AI systems with those chips to supercomputers. Constructed of 35,000 parts and packed with the company’s GPUs, the machine sells for more than $250,000. A new supercomputer on the market from Nvidia could sell for more than $1 million, Mr. Rasgon said.
“Even as system costs go up, performance per dollar gets better with each generation, and that’s what keeps customers buying,” said Rasgon.
Wall Street is watching for signs of a slowdown. Microsoft, Meta, Google and Amazon have all developed their own chips that can be used for AI, while traditional chip competitors such as Advanced Micro Devices and Intel have tried to cannibalize Nvidia’s business with their own AI processors.
But Hwang believes it will take time for anyone to catch up to Nvidia. The company got a 10-year head start and has cultivated a large community of AI programmers who love its technology.
“We are fundamentally changing how computing works and what computers can do,” Hwang said on a conference call with analysts in May. “The next industrial revolution has begun”
