Nvidia is crowned the most valuable company in the world

FILE PHOTO: NVIDIA logo shown at SIGGRAPH 2017
FILE PHOTO: A NVIDIA logo is shown at SIGGRAPH 2017 in Los Angeles, California, U.S. July 31, 2017. REUTERS/Mike Blake/File Photo

IMPORTANT POINTS:

  • Nvidia surpasses Microsoft with a market capitalization of $3.33 trillion.
  • Revenue from Nvidia’s data center business increased 427% from a year earlier.
  • Nvidia shares have risen more than ninefold since the end of 2022.

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Nvidia (NVDA), long known in the gaming community for its graphics chips, is now the most valuable public company in the world. Shares of the chipmaker rose 3.2% in midday trading on Tuesday, raising the company’s market capitalization to $3.33 trillion, surpassing Microsoft (MSFT). Earlier this month, Nvidia reached a market capitalization of $3 trillion for the first time, surpassing Apple (AAPL).

Impressive rise in Nvidia shares

Nvidia shares are up more than 170% so far this year and gained new momentum after the company reported first-quarter earnings in May. The stock has risen more than ninefold since the end of 2022, a rise that has coincided with the rise of generative artificial intelligence.

Nvidia owns about 80% of the market for AI chips used in data centers, a business that has grown considerably as OpenAI, Microsoft, Alphabet, Amazon, Meta and others have raced to acquire the processors needed to build AI models. and handle increasingly larger workloads.

Data center business revenue growth

In the most recent quarter, revenue in Nvidia’s data center business increased 427% from a year ago, reaching $22.6 billion, representing approximately 86% of the company’s total sales.

Apple shares were down about 1% during trading on Tuesday, giving the company a market value of $3.28 trillion. Microsoft shares fell less than a percentage point, giving it a market capitalization of $3.32 trillion.

History and evolution of Nvidia

Founded in 1991, Nvidia spent its first decades primarily as a hardware company that sold chips for gamers to run 3D titles. It also dabbled in cryptocurrency mining chips and cloud gaming subscriptions.

But over the past two years, Nvidia shares have soared as Wall Street recognized the company’s technology as the driving force behind an explosion in AI that shows no signs of slowing. The rally has raised co-founder and CEO Jensen Huang’s net worth to approximately $117 billion, making him the 11th richest person in the world, according to Forbes.

Impact of the rise of AI on Microsoft

Microsoft shares are up about 20% so far this year. The software giant has also been a big beneficiary of the AI ​​boom, after taking a significant stake in OpenAI and integrating the startup’s AI models into its major products, including Office and Windows. Microsoft is one of the largest buyers of Nvidia’s graphics processing units (GPUs) for its Azure cloud service. The company just launched a new generation of laptops designed to run its AI models, called Copilot+.

Nvidia has become a newcomer to the title of most valuable company in the US. In recent years, Apple and Microsoft have been trading the title.

Future of Nvidia in the market

Nvidia’s rise has been so rapid that the company is not yet part of the Dow Jones Industrial Average, a benchmark index of 30 stocks that has historically included the most valuable companies in the US. Along with its earnings report for the month Last year, Nvidia announced a 10-for-1 stock split, which took effect on January 7.

The split gives Nvidia a better chance of being added to the Dow, which is a price-weighted index, meaning companies with higher stock prices, rather than market capitalizations, have a disproportionate influence on the index. reference.