Nvidia, the semiconductor giant renowned for its cutting-edge graphics processing units (GPUs), has overtaken Microsoft to become the most valuable public company in the United States. Nvidia's market capitalization surged to $3.34 trillion on Tuesday, slightly eclipsing Microsoft's $3.33 trillion. Apple now trails in third place with a market cap of $3.27 trillion.
The remarkable ascent of Nvidia's stock is largely attributed to its dominance in the artificial intelligence (AI) sector. Nvidia's GPUs are pivotal for AI systems, including generative AI technologies like OpenAI's ChatGPT, which generate text, images, and other media. This strategic positioning has propelled Nvidia to the forefront of the tech industry, making it the leader among the so-called "Magnificent Seven" stocks that have significantly boosted the stock market since the AI boom began.
Nvidia's stock has appreciated approximately 175% year-to-date, making it the top performer in the S&P 500 index in 2023. The company, led by CEO Jensen Huang, has shown remarkable financial performance, with its latest quarter reflecting a 262% year-over-year increase in revenue and a 462% rise in profits.
Microsoft, while seeing substantial gains, with shares up about 20% this year, could not keep pace with Nvidia's rapid growth. Microsoft has also been a major player in the AI space, largely due to its significant investment in OpenAI and the integration of AI models into its flagship products such as Office and Windows. Despite this, Nvidia's recent financial results and market perception have given it the edge over Microsoft.
Nvidia's journey to the top is noteworthy. Founded in 1991, the company initially focused on developing hardware for the gaming industry, providing chips that enhanced the performance of 3D games. Over the years, Nvidia diversified its portfolio, venturing into areas like cryptocurrency mining chips and cloud gaming subscriptions. However, it was the surge in AI development that truly catapulted Nvidia to new heights.
The company's strategic pivot to AI has been nothing short of transformative. Nvidia now holds approximately 80% of the market for AI chips used in data centers, a sector that has grown exponentially as tech giants like Microsoft, Alphabet, Amazon, and Meta scramble to acquire the necessary processors to build advanced AI models. In the most recent quarter, Nvidia's data center business saw a 427% increase in revenue from the previous year, totaling $22.6 billion, which constitutes about 86% of the company's total sales.
This explosive growth in the AI sector has also significantly boosted the personal wealth of Nvidia's co-founder and CEO, Jensen Huang, whose net worth has soared to approximately $117 billion, positioning him as the 11th wealthiest individual globally according to Forbes.
Meanwhile, Apple, which briefly reclaimed the top spot as the most valuable U.S. company during its annual Worldwide Developers Conference, saw its market cap fall back below Microsoft's shortly thereafter. Despite introducing generative AI features for the iPhone, Apple could not sustain its lead.
The rapid rise of Nvidia's stock is also reflected in its decision to implement a 10-for-1 stock split on June 10. This move is expected to facilitate Nvidia's potential inclusion in the Dow Jones Industrial Average, an index comprising 30 of the most influential U.S. companies, which is price-weighted rather than market cap-weighted.
