Nvidia Corp. 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.
(Bloomberg) — Nvidia Corp. 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. Nvidia’s 24% surge on Thursday pushed it within grasp of a $1 trillion market capitalization, a level that would rank it among the tech elite including Apple Inc., Microsoft Corp., Amazon.com Inc. and Alphabet Inc.
“I’d be reluctant to say it has won the race, but it is winning right now,” said Zeno Mercer, senior research analyst at ROBO Global.
Following an AI-fueled sales forecast this week that blew Wall Street targets out of the water, Nvidia’s value surged by $184 billion on Thursday. That was the third-biggest one-day gain in market capitalization in the US ever.
Nvidia was co-founded in 1993 by Jensen Huang, who still runs the company. It proved more successful than its peers at developing chips that turn computer code into the realistic images 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 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 billions. 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.
The company’s sales in the three months ending in July will be about $11 billion, Nvidia said late on Wednesday, shattering an average analyst estimate of $7.18 billion.
Read More: Nvidia’s Blowout Forecast Sparks Huge Rally in All Things AI
“We’re seeing incredible orders to retool the world’s data centers,” Huang told analysts on a conference call. A trillion dollars of data center infrastructure will be upgraded to handle so-called accelerated computing, he said, letting them run generative AI tools such as ChatGPT. “The budget of a data center will shift very strongly to accelerated computing.”
Already, Nvidia had outperformed stocks in the major indexes it trades on this year. The chipmaker’s market capitalization of $939 billion is eight times that of Intel Corp., a company that had more than twice Nvidia’s annual revenue last year.
Shares fell 0.4% to $378.18 at 9:41 a.m. on Friday in New York.
Read More: ASML, Europe’s Most Valuable Tech Firm, Defines Global Chip War
“They may be in a unique position,” Sanford C. Bernstein analyst Stacy Rasgon said on Bloomberg Television. “Is it a one-time thing or is this the new normal? I don’t know.”
Investors have rewarded this fast expansion with a rich valuation. In the past five years, it has soared more than sixfold.
Read More: Nvidia’s $184 Billion Jump in Five Charts
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.