Nvidia Corp. is poised to become the world’s first chipmaker with a $1 trillion market capitalization, joining an exclusive club of American companies with a valuation that high.
The stock jumped as much as 4% in premarket trading to $404.91 a share on Tuesday. If the gains hold, the Silicon Valley firm will hit the $1 trillion mark and join a handful of companies including Alphabet Inc., Amazon.com Inc., Apple Inc., and Microsoft Corp. to be valued that high. Fewer than 10 companies globally have ever achieved this level.
Over the weekend, Nvidia Chief Executive Officer Jensen Huang announced several artificial intelligence-related products, touching on everything from robotics to gaming to advertising and networking. He also unveiled an AI supercomputer platform that will help tech companies create their own versions of ChatGPT. “It’s too much,” Huang said during his presentation in Taiwan. “I know it’s too much.”
Nvidia is the biggest maker of the kinds of specialized chips that power a new generation of AI products, alongside rivals such as Advanced Micro Devices Inc. and Intel Corp. The viral success of OpenAI’s ChatGPT — released just a few months ago — prompted investors to bet big on seemingly any technology that underpins AI, but Nvidia is top of that long list. Its chips already excelled at parallel processing and handling a bombardment of training data used by AI applications, making Nvidia the go-to name for hardware and know-how.
Nvidia is “in the pole position right now,” Zeno Mercer, senior research analyst at ROBO Global, said. “It is actually providing the tech needed to service this wave of innovation and utilization.”
Nvidia has a knack for riding tech trends — selling graphics chips that powered everything from the video game boom to the rise of cryptocurrency and the industry’s big bet on the metaverse. But arguably no trend stands to benefit the world’s most valuable chip company more than the rise of artificial intelligence. Last week, the company issued an AI-fueled sales forecast of $11 billion in the fiscal second quarter, blowing Wall Street targets out of the water and growing its value by $184 billion in a single day.
“We have never seen a guide like the one Nvidia just put up,” Sanford C. Bernstein analyst Stacy Rasgon said at the time.
Nvidia was co-founded in 1993 by Huang. It proved more successful than its peers at developing chips that turn computer code into the realistic images that computer gamers love and rode out a wave of consolidation that saw its rivals acquired, bankrupted, or merged into larger companies.
Under Huang, the company then pushed its technology into new markets, such as data center servers and artificial intelligence processing — a move that’s proving prescient today. In less than a decade, Nvidia’s data center business has grown from $300 million in annual revenue to $15 billion. The chipmaker has won orders to equip giant computing factories by successfully arguing that graphics chips can handle AI workloads better than more standard processors.
It’s become commonplace for tech companies to talk up their artificial intelligence prospects during earnings conference calls. References to AI soared after the launch of ChatGPT in November, and they don’t always spark a stock rally. But Nvidia has now become the model of a company that’s actually making money from AI. It’s the seller of picks and shovels in the gold-rush analogy.
Nvidia’s success has made investors even gloomier about Intel Corp., a Silicon Valley pioneer and the company most synonymous with computer chips. While many chipmakers saw their stocks gain in the wake of Nvidia’s blockbuster earnings last week, Intel actually fell. Nvidia’s valuation is now more than eight times that of Intel, despite the company having far less revenue.
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