In a remarkable turn of events, Nvidia has vaulted past tech giants Apple and Microsoft to become the world’s most valuable publicly listed company.
The company’s shares surged by 3.5 per cent to $135.58 on Tuesday, bringing its market capitalisation to an unprecedented $3.335 trillion.
This milestone marks the first time Nvidia has held the top spot, driven by a surge in demand for its cutting-edge chips and the rapid adoption of artificial intelligence (AI) technologies.
AI Demand Fuels Nvidia’s Meteoric Rise
Nvidia’s extraordinary growth is primarily fueled by its dominance in the AI chip market. The company has become the preferred supplier for AI applications, providing essential hardware for training and running sophisticated generative AI models, including OpenAI’s ChatGPT.
In just under two years, Nvidia transformed from a $300 billion company, struggling with a chip surplus due to a cryptocurrency market collapse, into a tech behemoth now at the centre of what CEO Jensen Huang calls a new “industrial revolution,” according to the Financial Times.
Huang emphasises Nvidia’s pivotal role in advancing generative AI, predicting transformative impacts across all economic sectors.
“We are at the centre of the new industrial revolution, unlocking the power of AI to transform every sector of the global economy,” Huang asserted.
The company’s latest products, such as the Hopper series of graphic processing units (GPUs) and the new Blackwell chips, are in high demand from tech giants like Google, Microsoft, and Amazon for their cloud services.
Record-Breaking Financial Performance
Nvidia’s financial performance has matched its stock market success, with quarterly revenue increases of 265 per cent and 262 per cent in February and May, respectively. The company’s share price has skyrocketed by approximately 170 per cent since the beginning of the year, significantly contributing to the 14 per cent year-to-date rise in the S&P 500 index.
“This is animal spirits now, it’s human emotion taking over,” noted Ted Mortonson, a tech strategist at Baird. “Nvidia is a fantastic company, don’t get me wrong. There are lots of drivers [for the stock] but 40 per cent in a month, that’s not normal.”
Also read: Nvidia overtakes Apple to become world’s second most valuable company
The AI chipmaker’s rapid ascent has also enriched its co-founder and CEO, Huang, whose net worth has surged by nearly $75 billion this year to $119 billion, positioning him among the world’s wealthiest individuals.
Market Reactions and Future Projections
Analysts and investors have reacted with both excitement and caution to Nvidia’s unprecedented rise.
While some express concerns about the sustainability of the market rally, many believe that the current AI-driven growth has considerable momentum.
“I’ve never seen anything quite like this in terms of the actual economics that are driving it. It’s pretty amazing,” commented Stacy Rasgon, a chip analyst at Bernstein.
Despite the remarkable concentration of market value in a few top tech companies, Hans Olsen, Chief Investment Officer at Fiduciary Trust, compared the current AI boom to the late 1990s tech bubble, suggesting it still has room to grow.
“This top-heaviness of the market is really concerning . . . we’re at levels of concentration that we haven’t had since 1999 — that’s problematic. But if you think back to the tech bubble that went from 1997 until March 2000, it had a long runway. This one still has runway, too,” he explained.
Nvidia’s Future and Industry Impact
As Nvidia continues to dominate the AI chip market, competitors like AMD and Intel struggle to catch up. Nvidia’s proprietary software ecosystem, Cuda, which supports developers using its chips, further cements its leadership position.
Investors, alongside Huang, argue that Nvidia is more than a chipmaker, according to Bloomberg.
“They’re not just selling chips, they’re selling systems,” said Michael Lippert, vice president and portfolio manager at Baron Capital Inc., pointing to the company’s proprietary software and development ecosystem.
Also read: Nvidia Announces Next-Gen AI Chip, Market Cap Inches Towards $3 Trillion
The race among top tech firms is expected to intensify, with analysts like Daniel Ives from Wedbush Securities forecasting a battle for the first company to reach a $4 trillion market cap.
“We believe over the next year the race to $4 Trillion Market Cap in Tech will be front and centre between Nvidia, Apple, and Microsoft,” Ives wrote in a note.
Nvidia’s innovative approach, combining hardware and software solutions, positions it uniquely in the tech landscape, suggesting a sustained period of growth and influence in the AI-driven future.
“Nvidia’s GPU chips are in essence the new gold or oil in the tech sector as more enterprises and consumers quickly head down this path with the 4th Industrial Revolution well underway,” added Ives.
Nvidia’s unprecedented rise to the top of the global market cap rankings as world’s most valuable company underscores the transformative power of AI and the company’s strategic prowess in capitalising on this technological revolution.
