Nvidia has become the world’s most valuable company, driven by the increasing demand for its computer chips essential for artificial intelligence software. The company’s stock price has soared, reaching all-time highs and surpassing major tech giants like Microsoft and Apple, fuelled by its rapid growth in the AI processing sector led by CEO Jensen Huang.
Nvidia has become the world’s most valuable company, surpassing Microsoft and Apple. The chipmaker’s stock price reached an all-time high of nearly $136 on Tuesday, rising by 3.5%. Nvidia’s computer chips are essential for artificial intelligence software, leading to increased demand for its products and boosting sales and profits over the past few years. Investors believe that the company’s earnings will continue to grow, driving up its share price. However, some have raised concerns about its high valuation.
Since going public in the early 2000s, Nvidia’s stock value has increased by a whopping 591,000%, propelling the chip company to the top of the stock market. This year alone, Nvidia’s market capitalization has surged from $1 trillion to $3 trillion, lifting US stock markets to record highs. The optimism surrounding emerging AI technology and the demand for high-end processors that support AI have fueled Nvidia’s rapid growth. Tech giants like Microsoft, Meta (formerly Facebook), and Google’s parent company Alphabet are all vying to enhance their AI computing capabilities.
Despite its remarkable success, some are cautious about Nvidia’s sky-high valuation and the potential future waning of demand for AI technology. Tom Stevenson, investment director at Fidelity, compared Nvidia’s growth to the dot-com bubble, highlighting the unprecedented scale of increase in the company’s value. While Nvidia’s revenues and earnings have been growing rapidly, concerns remain about its valuation, which is around 40 times earnings, a significant premium.
Nvidia’s dominance in the market has led to it being described as a “chip race,” with competitors like Intel and AMD playing catch-up. Although Nvidia currently leads, the intense competition in the chip industry suggests that maintaining its position may be challenging. Nvidia’s success can be attributed to a combination of having high-quality chips and being strategically positioned in the AI processing sector, capitalizing on the growing demand for AI technology.
Jensen Huang, the co-founder and chief executive of Nvidia, has played a pivotal role in the company’s success. Over the past 31 years, he has steered Nvidia’s evolution from a gaming chip company to a leader in AI processing. With 3% ownership of Nvidia, Huang’s personal wealth now exceeds $100 billion, reflecting the tremendous growth and value created by the company under his leadership.