Chip maker has become one of the most valuable U.S. companies, trailing only Microsoft and Apple
It took Nvidia NVDA 0.36%increase; green up pointing triangle 24 years as a public company for its valuation to reach the rarefied air of $1 trillion. Thanks to the chip maker’s role in powering the AI revolution, a second trillion took eight months.
Nvidia’s market capitalization topped $2 trillion in Friday trading before falling below the mark again. Still, only Microsoft and Apple have higher valuations.
The journey to become one of the most-valuable U.S. companies started at a Denny’s in 1993 and has been fast-tracked in recent years by Nvidia’s dominance of GPUs, or graphics processing units. These chips, worth tens of thousands of dollars each, have become a scarce, treasured commodity like Silicon Valley has seldom seen, and Nvidia is estimated to have more than 80% of the market.
Voracious demand has outpaced production and spurred competitors to develop rival chips. The ability to secure GPUs governs how quickly companies can develop new artificial-intelligence systems. Companies tout their access to GPUs to recruit AI workers, and the chips have been used as collateral to back billions of dollars in borrowing.
The chips are so valuable that they are delivered to the networking company Cisco Systems by armored car, said Fletcher Previn, Cisco’s chief information officer, at The Wall Street Journal’s CIO Network Summit this month.
On Wednesday, after Nvidia turned in a third straight quarter of forecast-beating results, company executives said that supplies were still tight and that a new generation of AI chips that is expected to be launched this year will be supply-constrained.
The design of the chips makes them critical parts for training the giant language models that underpin generative AI bots such as OpenAI’s ChatGPT. Much of the AI spending by such tech companies as Microsoft, Alphabet and Amazon.com has gone to GPUs.
Jensen Huang, Nvidia’s chief executive officer and co-founder, said generative AI is kicking off a wave of investment worth trillions of dollars, which he believed would double the amount of data centers in the world in the next five years and deliver market opportunities for Nvidia.
“A whole new industry is being formed, and that’s driving our growth,” he said on the company’s earnings call. Nvidia on Wednesday reported quarterly sales of $22.1 billion and forecast another $24 billion for its current quarter, each more than triple what was posted a year earlier and ahead of Wall Street’s bullish expectations.
The results have propelled Nvidia shares to their lofty heights. The stock opened Friday at $807.90, valuing the company at $2.02 trillion.
Shares later retreated and closed at $788.17, up 0.4% on the day. The stock needs a price of $800 for the company to be valued at $2 trillion.
Nvidia shares are up 59% so far this year after more than tripling in 2023.
Founded more than 30 years ago with an initial focus on computer graphics chips for PC gaming, Nvidia latched on early to AI.
Huang, one of the tech industry’s longest-tenured CEOs, owns 86.6 million Nvidia shares, according to FactSet, valued at about $68 billion.
Huang laid the groundwork for Nvidia’s AI rise in 2006 when he opened up its chips for purposes beyond computer graphics. Engineers soon started to use them for AI calculations, where they proved to be especially proficient. The kind of math needed to build complex AI systems dovetails with the way graphics chips work—by doing a multitude of calculations at once—more than the way traditional central processing units work.
Tens of thousands of Nvidia’s most advanced GPUs, called H100s, are commonly used in the creation of the most sophisticated AI systems. And they are pricey, going for around $25,000 each, according to analyst estimates.
Source : https://www.wsj.com/tech/ai/nvidia-stock-market-cap-2-trillion-b1c839c8?st=gcqrdn5xow43ajy