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Nvidia has become the world’s most valuable company, surpassing Microsoft and Apple, after months of shares exploding on investor enthusiasm for the company’s chips and artificial intelligence.
The company’s shares rose 3.2 percent to $135.18 on Tuesday, giving it a market capitalization of $3.332 trillion, overtaking the two tech giants that have long been competing for the top spot in the U.S. stock market.
Nvidia is one of the biggest beneficiaries of the surge in demand for chips that can train and run powerful generative AI models like OpenAI’s ChatGPT. In less than two years, the company has transformed itself from a $300 billion company plagued by a chip glut exacerbated by the collapse of the cryptocurrency bubble into one of the most powerful tech companies in the world, with other Silicon Valley giants lining up to secure its latest products.
The company’s big share price gains have singlehandedly driven about a third of the benchmark S&P 500 index’s 14% gain this year, surprising even bullish observers.
“This is now animal mentality, human emotion taking over,” said Ted Mortenson, a technology strategist at Baird. “Don’t get me wrong, Nvidia is a great company. They have a lot of drivers.[for the stock]…But 40 percent in one month is not normal.”
The Silicon Valley-based company, founded 31 years ago to make PC graphics cards for video gamers, has seen strong quarterly revenue growth over the past year, reporting a 265% year-over-year increase in February and a 262% increase in May. Its shares are up about 170% since the beginning of the year.
Nvidia CEO Jensen Huang declared that the company is at the center of a new “industrial revolution,” unleashing the power of generative AI and transforming every sector of the global economy with intelligent computing.
Google, Microsoft and Amazon have all bought the company’s Hopper series of graphics processing units for their cloud services, and its Cuda software ecosystem that provides tools for developers to use its chips has cemented its dominance.
Meanwhile, the company is rolling out a new generation of more powerful “Blackwell” chips, with Huang promising new products on a “yearly cycle.” Competitors including AMD and Intel have also launched their own AI chips, but they have yet to make a significant dent in Nvidia’s dominant market share.
“Someone has to be No. 1. Nvidia’s stock price didn’t just go up by itself. It’s their financials that have risen even more,” said Stacey Rasgon, a semiconductor analyst at Bernstein. “I’ve never seen anything like this in a real economy. It’s really surprising.”
The race to capitalize on the opportunities of generative AI is spreading across the tech industry, with Apple joining in at its annual developers conference last week, announcing that it will embed its own suite of generative models into its new operating system and signing a major partnership deal with OpenAI.
Nvidia’s growing influence on broader stock indexes has raised concerns about the long-term sustainability of the market rally, but few analysts and investors foresee a reversal in the near term.
Just one of 72 Nvidia analysts tracked by Bloomberg rated the company’s shares as a “sell.”
“The concentration at the top of this market is really worrying,” said Hans Olsen, chief investment officer at Fiduciary Trust, an asset manager with $23 billion in assets. “We’re at levels not seen since 1999 and that’s a problem.”
“But if you look back at the tech bubble that lasted from 1997 to March 2000, that had a long runway. This bubble still has runway,” he added.
Nvidia joins a duopoly that has been vying for the title of most valuable company in the U.S., and often the world, for more than a decade: Apple and Microsoft. The last time a U.S. company was worth more than either of them was in 2011, when Exxon Mobil was America’s most valuable company.