Nvidia surpasses Microsoft to become the world’s most valuable company

It has only been a couple of weeks since we reported that Nvidia had surpassed Apple’s market cap to become the second most valuable company in the world. Since then, Nvidia’s relentless stock surge has propelled the chipmaker to the top of the tech world, briefly claiming the title of the world’s most valuable company. This ascent reflects the booming interest in artificial intelligence (AI), where Nvidia’s graphics processing units (GPUs) are seen as a key driver.

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On Tuesday, Nvidia’s stock closed at $135.58, pushing its market capitalization to a staggering $3.3 trillion and surpassing both Microsoft and Apple. This capped a month-long jockeying match for the top spot, with Nvidia edging past its mega-cap peers.

The dominance of AI in investor focus is undeniable. Nvidia is considered the prime beneficiary of this trend, as its powerful GPUs are in high demand for powering the complex computations required by AI applications.

  • Demand Boom: Sales of Nvidia’s H100 accelerators, crucial for AI tasks, skyrocketed last year, driving a 125% increase in overall sales.
  • Microsoft’s AI Play: While Nvidia takes the lead, Microsoft isn’t far behind. Its investments and partnership with OpenAI, the creators of ChatGPT, position them as another major player in the AI space.
  • Apple Joins the Race: Apple finally unveiled its AI plans this week, appeasing investors and propelling its stock price upwards.

Analysts predict a heated race between these tech giants for the coveted $4 trillion market cap milestone.

Nvidia’s ascent has been nothing short of phenomenal. Here’s what fuelled their meteoric climb:

  • Beyond Chipmaker: Investors, like Michael Lippert of Baron Capital, see Nvidia as more than just a chipmaker. They point to the company’s proprietary software and development ecosystem as a key differentiator.
  • Record-Breaking Growth: Nvidia’s stock price has soared over 170% this year alone, adding a staggering $2 trillion to its market cap.
  • AI Gold Rush: Analyst Daniel Ives at Wedbush Securities emphasizes the crucial role of Nvidia’s GPUs in the ongoing AI revolution, likening them to the “new gold or oil” in the tech sector.

Nvidia’s journey is a remarkable tale of foresight and adaptation. Founded in 1999, the company quickly rose to prominence, replacing Enron in the S&P 500 within three years. Since its IPO, Nvidia’s stock has delivered a total return of a mind-boggling 591,078%, a testament to its successful navigation of technological shifts and its prominent role in the AI boom.

While Nvidia currently reigns supreme, its future at the top is not guaranteed. The company has weathered several 50% stock price drops in the past, and sustaining the current rally will hinge on continued heavy investment in AI hardware by customers.

Ultimately, Nvidia’s success can be attributed to its strategic focus on graphics processing and CEO Jensen Huang’s vision of a future dominated by “accelerated computing,” a domain perfectly suited for Nvidia’s technology. As Brian Mulberry of Zacks Investment Management puts it, “the management team deserves enormous credit for riding each wave of hardware innovation perfectly well.”