Why Nvidia is worth more than Apple

new york
CNN
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It’s easy to see why Apple, Microsoft, and Google are trillion-dollar companies — just think of how many people around the world use their products and depend on them to get through their daily lives — but these multi-generational brand names are now trailing behind Nvidia, which has suddenly become the most valuable publicly traded company in the world.

The tech giant, whose stock price has soared thanks to its prescient decision to get into AI chip manufacturing, is little known to the public, and many people can’t even pronounce its name (it’s spelled “en-VID-eeyah” on its website).

“Just read that Nvidia has now overtaken Microsoft as the most valuable company in the world. Wondering why, what is Nvidia doing,” one user posted on Reddit on Tuesday. Many of the investors who jumped on Nvidia probably can’t explain what it’s doing either.

With a market value of over $3 trillion, Nvidia is worth more than the entire economy of most countries. How did Nvidia get there?

When Nvidia’s founders started the company over a meal at Denny’s 31 years ago, they weren’t thinking about artificial intelligence; the company’s CEO, Jensen Huang, used to work there as a dishwasher. Their discussions centered on finding ways to make computers more powerful, especially for graphics-intensive applications, Huang said in a recent interview with “60 Minutes.” That led Nvidia to enter the graphics processing unit (GPU) space in 1999. (Nvidia popularized the term, but didn’t invent it, though it is often, erroneously, credited with doing so.)

Nvidia’s GPUs revolutionized the gaming industry, bringing new games to the market with cinematic visuals whereas previous games were 2D.

Eventually, the company went a step further, developing a programming language that allowed developers to write applications that would run on its hardware. By 2012, the company realized that its chips could be used for a variety of things beyond video games, primarily artificial intelligence applications.

And yet, the company remained a relative unknown to most investors and consumers, except for avid PC gamers.

But that all changed in November 2022 when OpenAI launched ChatGPT, shocking the world and forever changing people’s perception of AI capabilities. The app’s incredible ability to mimic human speech and perform complex tasks sent shivers down Silicon Valley and Wall Street.

Let’s say everyone decides en masse that they don’t want to drive or take public transport to work. Instead, everyone starts biking to work. Naturally, the demand for bikes would explode overnight. Why not jump on the bandwagon and start building bikes? You’ll need a lot of iron. Nvidia is the iron of AI.

Now that OpenAI’s success has made them look foolish in comparison, nearly every company, tech or not, is looking for ways to leverage AI, and everyone needs Nvidia badly.

It’s no wonder then that it has been the best-performing stock in the S&P 500 index in 2023, up an astounding 239%, and is up another 181% so far this year, making it the best-performing stock once again.

The increased demand for Nvidia chips has no doubt led to increased competition.

Slowly but surely, other big players like Meta, Amazon, IBM, and Microsoft have started to catch up, but none of them come close to Nvidia’s capabilities in the AI ​​space, which is why the company controls over 70% of the AI ​​chip market.

Wall Street’s AI craze seems like it’s never going to end. Is it a giant bubble that’s going to burst like the dot-com era? Maybe, but that seems unlikely given the intrinsic value of AI. That means demand for Nvidia chips isn’t going to go away anytime soon, but it’s only going to get more competitive.

Before you know it, another company with a name most people can’t pronounce will be called the next Nvidia.