Highlights:

  • Nvidia is now closely associated with the generative AI industry, and its stock is considered a benchmark for assessing the market’s strength.
  • Before generative AI became popular, Nvidia’s GPUs were mainly used in expensive graphics cards for gaming.

Recently, a leading artificial intelligence chipmaker, Nvidia Corp., has overtaken Microsoft Corp. to claim the title of the world’s most valuable publicly traded company, a milestone long anticipated by many.

Nvidia’s stock saw an increase of over 3.6% in recent trading, elevating its market capitalization to USD 3.34 trillion. This surge allowed Nvidia to surpass Microsoft, whose stock declined by 0.5%, resulting in a market cap of USD 3.32 trillion.

Just days after Nvidia’s market capitalization exceeded USD 3 trillion for the first time, the company achieved this new milestone by surpassing Apple Inc.

Nvidia’s stock has been experiencing an impressive upward trend, surging over 170% year-to-date. Following a stellar first-quarter earnings report in May, the stock broke the USD 1,000 barrier for the first time in the company’s history.

In response, the chipmaker announced a 10-for-1 forward stock split that took effect earlier this month. Since then, the stock has maintained its upward trajectory, and following the split, its shares closed recently at USD 135.38.

Nvidia’s rise has coincided with the increasing popularity of generative artificial technology. With an 80% market share in AI chips for data centers, Nvidia has capitalized on the booming industry. Hyperscale data center operators like Microsoft, Google Cloud, Amazon Web Services Inc., and Meta Platforms Inc. are aggressively acquiring the high-performance graphics processing units necessary to drive their AI operations.

In total, Nvidia’s stock has increased by over nine times since the beginning of the generative AI era in late 2022, marked by the launch of OpenAI’s ChatGPT. The company’s high-cost chips are recognized as crucial for the development and training of large language models like ChatGPT, as well as for running various AI applications. In its latest financial update, Nvidia reported that its data center revenue reached USD 22.6 billion, marking a remarkable 427% increase from the previous year and constituting 86% of its total sales.

Nvidia has become closely associated with the generative AI sector, and its stock is considered a barometer of the industry’s vitality. Amid substantial gains, Nvidia’s CEO Jensen Huang has experienced a significant surge in his net worth. According to Forbes, his wealth of USD 117 billion positions him as the 11th richest person globally.

Before the emergence of generative AI, Nvidia’s GPUs primarily fueled high-end graphics cards for the gaming sector. Additionally, Nvidia’s GPUs have been found to be extensively utilized by cryptocurrency miners.

Microsoft has also seen gains from the AI boom, although not as dramatically as Nvidia. Its stock has risen approximately 20% year-to-date, partly driven by its strategic support of OpenAI. Microsoft has made significant investments in the leading AI model creator, establishing a strong partnership that positions it at the forefront of the generative AI revolution.

Microsoft has incorporated OpenAI’s models into key products like the Windows operating system and the Office productivity suite. Additionally, as one of Nvidia’s major clients, Microsoft has purchased thousands of GPUs for its Azure cloud computing service.

While Nvidia is not the sole tech firm capitalizing on the rush to integrate AI into all facets of daily life, few others have achieved comparable growth, according to Holger Mueller, an analyst at Constellation Research Inc. Mueller noted that Nvidia holds a distinctive position to expand far beyond the confines of conventional technology firms due to minimal competition, a situation unlikely to shift in the foreseeable future.

“Jensen Huang and his team is doing all that they can to further the company’s position, accelerating the innovation cycle of its AI platforms and designs, with plans to ship new ones every year now, instead of every two years like before. No one else can do what it does. Compare that to Apple and Microsoft, who both face numerous serious competitors. If Nvidia can pull of its acceleration strategy successfully, it will even harder for the likes of AMD and Intel to catch up,” Mueller said.

Nvidia has never held the title of the world’s most valuable company. Over the past few years, this distinction has typically been held exclusively by Microsoft and Apple. However, neither company has been able to keep pace with Nvidia’s meteoric rise. Apple, for instance, has seen its stock increase by just 16% year-to-date. Following a recent 1.1% decline in its stock price, Apple ended the day as the world’s third-largest company by market capitalization, trailing Microsoft, with a market cap of USD 3.29 trillion.