Microsoft and Apple are out. The stock market has a new champion.
Nvidia on Tuesday overtook two of the tech industry's biggest names to become the world's most valuable publicly traded company, according to data from S&P Global. The company's rise is being driven by a boom in generative artificial intelligence and surging demand for its chips, or graphics processing units, that enable the creation of AI systems.
Nvidia's growth spurt is one of the fastest in market history. Just two years ago, the company's market cap was over $400 million. Today, it has gone from $1 trillion to more than $3 trillion in the space of a year.
Nvidia shares rose 3.6% on Tuesday, giving it a market capitalization of $3.34 trillion. Microsoft and Apple both fell, lagging the Silicon Valley chipmaker.
Years before other major chip companies, Nvidia CEO Jensen Huang was convinced that GPUs would be essential to building artificial intelligence, and he aligned his company for what he believed would be the next big thing in technology.
His big bet is paying off: By one measure, Nvidia controls more than 80% of the market for chips used in AI systems. Nvidia's largest customers, constantly vying for orders for the chips that run the computers in their giant data centers, are developing their own AI chips to avoid relying too much on any one supplier.
“Nobody else had fully understood or appreciated this,” said Daniel Newman, CEO of technology research firm Futurum Group. “They saw a trend, they built around it and they enabled the market. They can essentially charge whatever they want.”
Nvidia's rise has made Mr. Huang a celebrity in tech circles, and after a computing conference in Taiwan earlier this month he was surrounded by autograph-seekers, including a woman who asked to have her breast autographed.
The company's rise is reminiscent of dot-com era giants like Cisco and Juniper Networks, which made equipment that runs the internet's communications networks. Cisco's stock price rose more than 1,000-fold between its 1990 IPO and 2000, when it briefly became the world's most valuable company.
The speed at which Nvidia's value has grown is astonishing: Apple surpassed $1 trillion in market cap in August 2018 and became a $3 trillion company last June. It took Microsoft nearly five years to go from $1 trillion to $3 trillion.
But Nvidia investors are betting on the company's potential rather than its current profits: Microsoft and Apple generate more than $85 billion in annual profits, while Nvidia makes $42.6 billion.
“The numbers are growing exponentially and people are worried, 'Is this sustainable?'” said Stacey Rasgon, an analyst at Bernstein Research. “If we don't see the benefits of AI, it's all going to collapse.”
This is a developing story, check back for updates.
