AI boom catapults Nvidia to stock market Olympus

Nvidia shares beat Microsoft

June 19, 2024, 10:50 AM | By Andrej Sokolow, dpa / Editor: Michaela Wurm

Jensen Huang, Founder and CEO of Nvidia

Nvidia has long been known for graphics cards. But now the company’s chips are playing a key role in artificial intelligence, bringing Nvidia to a milestone that was once almost unimaginable.

The AI ​​boom has made chip company Nvidia the most valuable company on the stock market. Nvidia had a market value of more than $3.33 trillion on Tuesday, surpassing software giant Microsoft.

Nvidia plays a key role in artificial intelligence (AI) applications. The company’s chip systems are used to train AI software in data centers—and are increasingly used in their operations as well. Rivals like Intel or AMD have yet to provide Nvidia with any noticeable competition in the market.

With its rise to the top, Nvidia shares are the stock with the best price performance of the past 25 years, as calculated by financial service Bloomberg. Since its IPO in 1999, the value of the stock has increased by a whopping 591,078 percent, according to Bloomberg figures, including reinvested dividends. In other words, one dollar invested at that time became more than 5,900 dollars.

Lately, it’s been proven time and time again that demand for AI software is driving Nvidia’s business to explosive growth. In the last quarter alone, revenue jumped 262 percent year-over-year to $26 billion, while quarterly profit skyrocketed from $2 billion to nearly $15 billion.

And 61-year-old CEO Jensen Huang, co-founder of Nvidia and charismatic showman, promises that this is just the beginning of a computing revolution.

The stock market believes in the visions of the Nvidia boss

Huang is convinced that in the future, most content will no longer be prefabricated from storage, but that AI software will generate it fresh based on the current situation. For example, you can talk to the construction technology via a chatbot instead of looking at data somewhere.

Nvidia is preparing for this future with a new generation of chips called Blackwell. With the current Grace Hopper system, for example, you would have the chatbot ChatGPT can train in three months with 8,000 Nvidia chips and 15 megawatts of power, Huang said. Blackwell can do this with 2,000 chips and 4 megawatts of electricity.

If Huang is right in his vision for the future, it would mean even more revenue for Nvidia. And investors’ belief in this is one of the driving forces behind the stock’s recent rise. The paper is currently worth about ten times more than it was in September 2022. Huang himself rose to 12th place on Bloomberg’s ranking of the world’s richest people with an estimated fortune of $115 billion.

Nvidia also operates the ‘Omniverse’ platform, which allows companies to better control their factories using so-called digital twins, and supplies Mercedes, among others, with car computers for driver assistance functions.

The basis for success is the technology that Nvidia once developed for graphics cards. But later it became clear that the systems are much more efficient in training AI than classic processors. Nvidia was lucky that they had the right technology at the right time.

AI is also making Microsoft and Apple stocks popular

In addition to Nvidia and Microsoft, Apple is also in the top group in terms of market value. The announcement of new AI functions last week caused a price increase for the iPhone company. Microsoft has been working on a multi-billion pact with the company for years ChatGPT-Inventor OpenAI to bring artificial intelligence into its products.

Nvidia is profiting from all this, selling chip systems costing thousands to Microsoft, Google and the Facebook group Meta, among others. The Nvidia share price jump of more than 3.5 percent on Tuesday was preceded by the announcement of a collaboration with the computer company Hewlett Packard Enterprise for technology for the use of AI in companies. In after-hours trading, Nvidia shares rose another 0.6 percent.

Also, Silicon Valley website ‘The Information’ reported Tuesday that Huang is now concerned that large customers like AWS and Microsoft are buying more Nvidia chip systems than can currently fit in their data centers. To ensure that there is no oversupply on the market later, buyers must now prove that they have sufficient capacity.

On Tuesday, after a slight drop in its stock price, Microsoft had a market value of $3.317 trillion, while Apple was worth $3.286 trillion.

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