Key Takeaways
- Nvidia surpasses Microsoft as the most valuable company with a $3.335 trillion market cap.
- Success is driven by demand for GPUs in AI systems as well as a recent 10-for-1 stock split.
- Forecasts predict Nvidia’s value could reach $10 trillion by 2030.
Move over Microsoft and Apple, there’s a new company at the top of the pile. On June 18, Nvidia’s stock rose by 4%, taking its market cap beyond that of Microsoft, and making the chip manufacturer the most valuable company on the planet.
Nvidia snuck past Apple into second place on this list earlier this month and has now claimed the top spot. Nvidia hit a market cap of $3.335 trillion, surpassing the $3.326 trillion of Microsoft.
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What’s fueling Nvidia’s growth?
Focus on AI chips is paying off
Nvidia
There are a couple of reasons why Nvidia has seen its stock price soar in recent months. The first is that the demand for the firm’s processors is exceeding supply.
Nvidia was founded as a company that wanted to bring 3D graphics to the gaming market. It developed the graphics processing unit (GPU) which is a dedicated chip that handles the intensive calculations needed for rendering graphics. However, in recent years, GPUs have proved highly capable for other uses, including crypto mining.
Nvidia recognized that GPUs were also going to be in demand for the complex calculations needed to power machine learning and AI models. Nvidia is now the leading manufacturer of the powerful GPUs that are used to power AI systems such as ChatGPT. The enormous rise in popularity of AI chatbots has seen a huge surge in demand for these chips.
Nvidia is now the leading manufacturer of the powerful GPUs that are needed to power AI systems such as ChatGPT.
Nvidia also recently carried out a 10-for-1 stock split, which helped boost its value even further. A stock split is when a company increases the number of its shares to bring down the price of a single share, making it a more affordable investment. After this split, someone who held a single share worth $1000 would now own ten shares, each worth $100. This has made the stock more attractive to individual investors, boosting the value of the company even further.
Nvidia’s growth shows no sign of slowing down
Demand for AI chips is only going to grow
Pocket-lint
Currently, it doesn’t look like Nvidia will be slowing down any time soon. The company’s value only passed $2 trillion in February and is already well on its way to doubling that. With demand for AI chips continuing to increase, the company’s stock is likely to soar even further.
Analyst Beth Kindig predicted in 2021 that Nvidia would overtake Apple’s valuation within five years. After the chip maker managed that in less than four years, she’s now predicting that Nvidia stock could reach a market cap of $10 trillion by 2030. To put it into perspective, that would make Nvidia three times as valuable as Microsoft and Apple are currently.
Not everyone is in agreement, however. Some analysts point to longer term drops in the Nvidia share price after previous stock splits, with others speculating that the AI boom could be another dot-com bubble that could come crashing down. Even if AI continues to grow, the valuations of these companies may still be overblown, and may end up falling significantly. Only time will tell.
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