Move over, Microsoft and Apple. Here comes the new king of the stock market.
Nvidia surpassed those two best-known tech companies on Tuesday to become the world’s most valuable public company, according to S&P Global. Its rise has been fueled by the boom in generative artificial intelligence and a surge in demand for its chips — graphics processing units, or GPUs — that make it possible to create AI systems.
Nvidia’s rise is one of the fastest in stock market history. Just two years ago, the company’s market value was just over $400 billion. Now it has grown from $1 trillion to more than $3 trillion in a year.
Nvidia’s shares rose 3.6% on Tuesday, lifting its market value to $3.34 trillion. Microsoft and Apple both fell and closed behind the Silicon Valley chipmaker.
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Nvidia’s rise is a testament to the extent to which artificial intelligence is disrupting the world’s largest companies. The rise of this powerful technology first made MicrosoftReplace Apple in January this yearbecoming the largest company by market value, and then pushed Nvidia to take the crown. Last week, Apple said it also wantedJoin the AI ​​Gameand will add the technology to its products, including the iPhone, this fall.
Long before other big chip companies, Nvidia CEO Jensen Huang bet that GPUs would be key to building artificial intelligence, and he pivoted his company to what he believed would be the next big boom in tech.
His gamble is paying off. Nvidia controls more than 80% of the market for chips used in artificial intelligence systems. Its largest customers often compete for orders for chips, which are indispensable for running computers in giant data centers, and these customers are also making their own artificial intelligence chips to reduce their dependence on a single supplier.
“No one could have fully anticipated or understood this,” said Daniel Newman, CEO of technology research firm Futurum Group. “They saw the trend, followed it, and drove the market. They could essentially set the price however they wanted.”
Nvidia’s rise has made Huang, 61, a tech celebrity. At a computer show in Taiwan earlier this month, he was mobbed by attendees seeking autographs, including one woman who asked him toSign her name on her chest.
The company’s rise is reminiscent of dot-com-era giants like Cisco and Juniper Networks, which make the equipment that runs the internet’s communications networks. From its 1990 initial public offering to 2000, Cisco’s stock price rose more than 1,000-fold, briefly making it the world’s most valuable company.
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Nvidia’s market value is growing at an astonishing rate. Apple broke through $1 trillion in August 2018, and only became the first company to reach a market value of $3 trillion in June last year. It took Microsoft nearly five years to rise from $1 trillion to $3 trillion.
Nvidia’s investors are more bullish on its potential than its current profits. In the three months ending in March, Microsoft and Apple each generated more than $21 billion in profits. In the most recent quarter ending in April, Nvidia generated $14.88 billion in profits, but that was up more than 600% from the same period last year.
“The numbers are getting so big, so fast, that people are concerned: Is this sustainable?” said Stacey Rasgen, an analyst at Bernstein Research. “If the payback for AI isn’t there, then the whole thing comes crashing down.”
Since the S&P 500 was created in 1926, only 12 companies have held the top market cap in the index: AT&T, Apple, Cisco, DuPont, ExxonMobil, General Electric, General Motors, IBM, Microsoft, Philip Morris, Walmart, and now Nvidia.
Nvidia’s rise has been fueled by its ability to consistently beat Wall Street expectations. Sales tripled year-over-year to $26 billion last quarter. The company also expects sales to rise by $1.3 billion this quarter.Doubled year-on-year.
Nvidia’s products range from chips to the software needed to build artificial intelligence systems with those chips to supercomputers. These machines have 35,000 parts and are equipped with the company’s graphics processors and start at $250,000. According to Rasgen, a new supercomputer that Nvidia is about to launch may cost more than $1 million.
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“Even though the cost of the system is going up, the price/performance ratio is getting better with each generation, and that’s why they keep selling,” Rasgon said.
Wall Street has been looking for signs that the company’s growth is slowing.Microsoft, Meta, Google, and AmazonBoth have developed their own AI chips, while traditional chip rivals such as AMD and Intel have also tried to challenge Nvidia’s business with their own AI processors.
But Huang believes it will take time to catch up with Nvidia. The company has a decade-long lead andCultivated a large number ofArtificial intelligence programmers who are fond of its technology.
“We are fundamentally changing the way computing works and what computers can do,” Huang said on a call with analysts in May. “The next industrial revolution has begun.”