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Nvidia leapfrogged two of the tech industry’s most storied names on Tuesday to become the world’s most valuable public company, according to data from S&P Global. Its rise has been fueled by a boom in generative artificial intelligence and growing demand for the company’s chips — known as graphics processing units, or GPUs — that enable the creation of AI systems.
Nvidia’s rise is among the fastest in the history of the market. Just two years ago, the company’s market valuation exceeded $400 billion. Now, in the space of a year, it has gone from $1 trillion to more than $3 trillion.
Nvidia’s stock price rose 3.6% on Tuesday, bringing its value to $3.34 trillion. Both Microsoft and Apple lost ground, ending the day behind the Silicon Valley chipmaker.
Nvidia’s rise is a testament to how artificial intelligence has disrupted the world’s biggest companies. The rise of the powerful technology elevated Microsoft to the largest market cap in January, dethroning Apple, before pushing Nvidia to take the crown. 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 major chipmakers, Nvidia CEO Jensen Huang bet that GPUs would be essential to the development of artificial intelligence and adapted his company to accommodate what he believed would be the next big technology boom.
His big gamble is paying off. By some measures, Nvidia controls more than 80% of the market for chips used in artificial intelligence systems. Nvidia’s major customers regularly order chips to run computers in their giant data centers and are building their own AI chips so they aren’t so dependent on a single supplier.
“No one else has seen or fully appreciated this,” said Daniel Newman, chief executive of Futurum Group, a technology research firm. “They saw the trend, they built for the trend and they enabled the market. They can actually upload whatever they want.”
Nvidia’s rise has made Mr. Huang, 61, a celebrity in the tech world. After a computer conference in Taiwan earlier this month, he was surrounded by attendees wanting his autograph, including one woman who asked him to sign her chest.
The company’s rise is reminiscent of dot-com era titans like Cisco and Juniper Networks, which built the equipment that ran communications networks for the Internet. Cisco’s stock rose more than a thousandfold between its initial public offering in 1990 and 2000, when it briefly became the world’s most valuable company.
The speed with which Nvidia’s value has grown has been astonishing. Apple passed the $1 trillion mark in August 2018 and became the first $3 trillion company last June. Even Microsoft took nearly five years to go from $1 trillion to $3 trillion.
Nvidia investors are betting more on its potential than on current profits. Microsoft and Apple each generated more than $21 billion in profits during the three months ended in March. Nvidia generated profits of $14.88 billion in its latest quarter, which ended in April, but up more than 600% from a year earlier.
“The numbers have gotten so big so quickly that people are asking, ‘Is this sustainable?’” said Stacy Rasgon, an analyst at Bernstein Research. “If it turns out that AI doesn’t make a comeback, then everything falls apart.”
Since the index was created in 1926, only 12 companies have led the S&P 500 in market valuation: AT&T, Apple, Cisco, DuPont, Exxon Mobil, General Electric, General Motors, IBM, Microsoft, Philip Morris, Walmart and now Nvidia, according to S&P Dow Jones Indices.
Nvidia’s rise has been fueled by its ability to consistently beat Wall Street expectations. Sales in the latest quarter tripled from the previous year to $26 billion. It is also expected to double sales in the current quarter.
Nvidia sells everything from chips and the software needed to build artificial intelligence systems with those chips, to supercomputers. The machines, made up of 35,000 parts and equipped with the company’s GPUs, sell for $250,000 or more. A new supercomputer that Nvidia is bringing to market could sell for more than $1 million, Rasgon said.
“Even though the cost of the system is going up, the performance per dollar is improving with each generation, and that’s how they’re able to continue to acquire customers,” Rasgon said.
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 artificial intelligence, and traditional chip rivals like Advanced Micro Devices and Intel have tried to get into Nvidia’s business with their own AI processors.
But Mr. Huang believes it will be a while before anyone can catch up with Nvidia. The company has a decade head start and has cultivated a large community of AI programmers who favor its technology.
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