Nvidia becomes the most valuable company in the world

Technology multinational Nvidia has risen to the position of the world’s most valuable company, surpassing tech giant Microsoft. This shift is driven by Nvidia’s central role in the fast-growing market Artificial Intelligence (AI) sector, thanks to its high-quality processors.

According to data from S&P Globalthe company surpassed two renowned technology companies Tuesday June 18, 2024 to become the top-ranked listed company worldwide in terms of value. The company’s remarkable growth can be attributed to the booming field of generative artificial intelligence and the increasing need for graphics processing units (GPUs), which have played a crucial role in the development of AI systems.

The company’s rise is among the fastest in market history. Just two years ago, the company’s market value was just over $400 billion. Now, within a year, it has increased from $1 trillion to over $3 trillion.

On Tuesday, Nvidia’s stock price rose 3.6 percent, pushing its value to $3.34 trillion. Meanwhile, both Microsoft and Apple saw declines, ending the day behind the Silicon Valley chipmaker.

Nvidia’s rise underlines the transformative impact of artificial intelligence on the world’s largest companies. The rise of AI propelled Microsoft to the highest market cap for the first time in January, dethroning Apple, before pushing Nvidia to take the crown. Last week, Apple announced its entry into the AI ​​space and planned to integrate the technology into its products, including the iPhone, this fall.

Years before other major chip companies Nvidia CEO Jensen Huang, foresaw the importance of GPUs in building AI and tailored his company’s strategy accordingly. This foresight is now paying off, now that the company has control more than 80 percent of the AI ​​system chip market. Major customers regularly compete for its chips to power their massive data centers, while also developing their own AI chips to reduce dependence on Nvidia.

“No one else has fully seen or appreciated this,” he said Daniel Newman, CEO of the Futurum Group, a technology research firm. “They saw the trend, built for the trend and made the market possible. They can basically charge whatever they want.”

Nvidia’s meteoric rise has made 61-year-old Huang a celebrity in the tech world. After a recent conference in Taiwan, attendees eagerly asked for his autograph, with one woman even asking him to sign his name on the chest.

The company’s rise is reminiscent of dotcom-era titans like Cisco and Juniper Networks, which built the infrastructure for the Internet. Cisco’s stock has risen more than a thousandfold from its initial public offering in 1990 to 2000, when it briefly became the most valuable company in the world.

The speed at which Nvidia’s value has grown is remarkable. It took Apple almost five years to climb from $1 trillion to $3 trillion, and Microsoft took the same amount of time. Nvidia’s investors are banking more on the potential than on current profits. While Microsoft and Apple each generated more than $21 billion in profits in the three months ending in March, the company generated $14.88 billion in the most recent quarter, a 600 percent increase from the previous year.

“The numbers have gotten so big so quickly that people are concerned: Is this sustainable?” said Stacy Rasgon, an analyst at Bernstein research. “If the returns from AI turn out not to be there, then everything will collapse.”

Since its inception, only twelve companies have led the S&P 500 by market valuation, with Nvidia joining AT&T, Apple, Cisco, DuPont, Exxon Mobil, General Electric, General Motors, IBM, Microsoft, Philip Morris and Walmart. to the S&P Dow Jones indices.

Nvidia’s success is largely due to consistently exceeding Wall Street expectations. In the latest quarter, sales tripled from a year earlier to $26 billion, and the company forecast that sales would double in the current quarter.

Nvidia sells everything from chips and the software needed to build AI systems with those chips to supercomputers. These machines, packed with Nvidia’s GPUs, sell for $250,000 or more, with new models potentially costing more than $1 million.

“Although the cost of the system is rising, the performance per dollar is improving with each generation, helping to keep customers buying,” Rasgon said.

Wall Street is watching closely for signs of a slowdown. Companies like Microsoft, Meta, Google and Amazon have all developed their own AI chips, while traditional chip rivals like Advanced Micro Devices and Intel are trying to break into Nvidia’s market with their own AI processors.

However, Huang believes it will take some time for competitors to catch up. Nvidia has a decade-long head start and a large community of AI programmers who favor its technology.

“We are fundamentally changing how computers work and what computers can do,” Jensen Huang said in a conference call with analysts in May. “The next industrial revolution has begun.”

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