Move over, Microsoft and Apple. The stock market has a new king.
On Tuesday, Nvidia surpassed two of the biggest names in technology to become the world's most valuable public company, according to data from S&P Global. Its rise has been fueled by the rise of generative artificial intelligence and growing demand for the company's chips, known as graphics processing units or GPUs, that have made the creation of artificial intelligence systems possible.
Nvidia's rise is among the fastest in market history. Just two years ago, the company's market valuation was just over $400 billion. Now, in the span of a year, it has gone from $1 trillion to over $3 trillion.
On Tuesday, Nvidia's share price rose 3.6 percent, raising its value to $3.34 trillion. Both Microsoft and Apple fell, ending the day behind the Silicon Valley chipmaker.
Nvidia's rise is a testament to how much artificial intelligence has disrupted the world's largest companies. The rise of the technology powerhouse first lifted Microsoft to the largest market capitalization in January, dethroning Apple, before pushing Nvidia to take the crown. Last week, Apple said it was also getting into the artificial intelligence game and will add the technology to its products, including the iPhone, this fall.
Years before other big chip companies, Nvidia CEO Jensen Huang bet that GPUs would be essential for building artificial intelligence and adapted his company to fit what he believed would be the next big technology boom.
His big bet is paying off. By some measures, Nvidia controls more than 80 percent of the market for chips used in artificial intelligence systems. Nvidia's biggest customers regularly compete for orders for chips to run computers in its giant data centers and are building their own artificial intelligence chips so they are not so dependent on a single supplier.
“No one else saw or fully appreciated this,” said Daniel Newman, chief executive of Futurum Group, a technology research firm. “They saw the trend, built for the trend and enabled the market. They can effectively charge whatever they want.”
Nvidia's rise has made Huang, 61, a celebrity in the tech world. After a computer conference in Taiwan earlier this month, he was surrounded by attendees who wanted his autograph, including a woman who asked him to signs his 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 at which Nvidia's value has grown has been surprising. Apple surpassed $1 trillion in August 2018 and became the first $3 trillion company last June. It also took Microsoft almost five years to go from $1 trillion to $3 trillion.
Nvidia investors are betting more on its potential than its current profits. Microsoft and Apple each generated more than $21 billion in profits during the three months ending in March. Nvidia generated $14.88 billion in profit in its most recent quarter, which ended in April, but that was more than 600 percent more than a year earlier.
“The numbers have increased so much and so quickly that people are worried: Is this sustainable?” said Stacy Rasgon, an analyst at Bernstein Research. “If it turns out that there is no return of ai, then everything will fall apart.”
Only 12 companies have led the S&P 500 by market valuation since the index was created in 1926: 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 its latest quarter tripled from a year earlier to $26 billion. It also projected it would 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, which have 35,000 parts and are 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.
“Although the cost of the system is increasing, the performance per dollar improves with each generation, and that's how they can keep customers buying,” Rasgon said.
Wall Street has been watching for signs of a slowdown. Microsoft, Meta, Google and amazon have all developed their own chips that can be used for ai, and traditional chip rivals such as Advanced Micro Devices and Intel have tried to get into Nvidia's business with their own ai processors.
But Huang believes it will take time to catch up to Nvidia. The company is a decade ahead and has cultivated a large community of ai programmers who prefer its technology.
“We are fundamentally changing how computing works and what computers can do,” Huang said on a conference call with analysts in May. “The next industrial revolution has begun.”
