How Nvidia's AI Made It the World's Most Valuable Firm

As companies across the world race to develop and implement AI technologies, the semiconductor industry has become increasingly crucial to this evolution.

Within this context, Nvidia, a leading designer of graphics processing units (GPUs) and AI chips, has risen to prominence, reflecting the growing importance of AI in the global economy and the changing dynamics of the tech industry.

This trend has reshaped the semiconductor industry, with Nvidia's GPUs becoming essential components in the AI infrastructure of major tech companies worldwide.

According to data from LSEG, a global financial markets infrastructure and data provider, this milestone makes Nvidia the first company in history to surpass a stock market value of US$3.6tn.

Nvidia's record-breaking market valuation

Nvidia's shares reached a record high on Thursday, propelling the company's market value to US$3.65tn.

The surge in Nvidia's stock price came as Wall Street extended a rally sparked by Donald Trump's return to the White House.

The company's shares rose by 2.2%, driven by investor optimism regarding potential tax cuts and reduced regulations under the new Republican administration.

This increase allowed Nvidia to overtake Apple as the world's most valuable company, with Apple's market value standing at US$3.44tn after a 2.1% rise in its stock price.

The company has been at the forefront of developing chips specifically designed for AI applications, which have become increasingly crucial for tech giants like Microsoft, Alphabet and others as they build out their AI computing capacity.

The demand for Nvidia's AI chips, particularly its H100 GPU, has been also insatiable.

According to reports from Mizuho Securities the investment bank, Nvidia's AI accelerators hold between 70% and 95% of the market share for AI chips.

This dominance has been underpinned by Nvidia's flagship AI GPUs and its CUDA software, which has become the industry standard for AI development.

Broader implications for the tech sector

The surge in Nvidia's value additionally is part of a broader trend in the technology sector.

For instance, the S&P 500 technology index which includes companies like Apple and Microsoft has risen by over 4% in the two sessions since Trump's election victory.

This indicates a general optimism among investors about the potential benefits of a Republican administration for the tech industry.

Nvidia's stock has also climbed 12% in November alone, with its value tripling so far in 2024.

This remarkable growth has positioned the company's market value above the combined worth of several major corporations, including Eli Lilly, Walmart, JPMorgan, Visa, UnitedHealth Group and Netflix.

Chip demand

Yet with AI development comes increased chip demand. 

Despite Nvidia's current dominance, the AI chip market is becoming increasingly competitive.

The AI chip market is expected to reach US$400bn in annual sales in the next five years, according to market analysts and AMD, highlighting the significant growth potential in this sector.

Analysts anticipate that Nvidia will also report an 80% increase in quarterly revenue, reaching US$32.9bn, when it announces its results on November 20.

However, the competition at the top of the market valuation rankings remains fierce.

In June, Nvidia briefly became the world's most valuable company before being overtaken by Microsoft and Apple.

The market capitalisations of these tech giants have been closely matched for several months, with Microsoft's market value standing at nearly US$3.16tn as of Thursday.

Jensen Huang, Chief Executive Officer of Nvidia, says: "Generative AI is the defining technology of our time.

He concludes: “Working with the most dynamic companies in the world, we will realise the promise of AI for every industry."

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