The explosive performance of NVIDIA stock after the earnings report the previous day stopped at 24% – this was the result not only of the company’s financial results, which were better than analysts’ expectations, but also of very optimistic future forecasts due to the boom in artificial intelligence technologies. NVIDIA stands on the cusp of an elite club of companies with a market cap of more than $1 trillion.
This year alone, NVIDIA’s stock is up more than 160%, and just yesterday its market cap rose $183.8 billion, the third largest daily increase in capitalization by an American company in history. The record was set by Amazon, whose price increased by $191.3 billion on February 4, 2022, followed by Apple with a price increase of $190.9 billion on November 10, 2022. After the jump, the capitalization exceeded NVIDIA’s $938 billion, coming close to the “trillionaires” represented by Apple, Microsoft, Amazon, and Alphabet.
Interestingly, NVIDIA grew more than the capitalization of all companies like AMD and Intel in one day. The former is valued at $192 billion, while the latter has shrunk to just $113 billion.
The decision to found the company was made in April 1993 when the current CEO, Jensen Huang, was discussing with two fellow engineers how computer graphics could be improved. In late 2006, NVIDIA revolutionized the development of software that harnessed the power of GPUs for non-graphics purposes. It quickly became clear that NVIDIA chips were capable of the computations needed to run AI systems – they excel at multitasking, while CPUs were less efficient at it.
NVIDIA GPUs have also shown high efficiency in the cryptocurrency mining space, which has helped the company overtake Intel in 2020 in terms of market cap. With the onset of “crypto winter,” NVIDIA shares started falling, but the boom in AI technologies took them to new heights. Analysts believe that the AI boom promises the company more significant and longer-term prospects than cryptocurrencies: There are no competitors that can match the range and quality of chips and software for resource-intensive calculations required for generative AI to work – only ChatGPT requires 10,000 NVIDIA accelerators.
Today, the AI industry is being fiercely contested by Amazon, Microsoft, and Google – Huang described this as the “iPhone moment,” referring to the explosive growth in the number of smartphones since Apple’s debut phone was announced in 2007. AI developers are actively modernizing data centers, leveraging the power of NVIDIA accelerators and software – the company is getting “incredible orders,” the boss admitted. Demand for its chips was so high that the entire supply chain was struggling to keep up, prompting NVIDIA to ramp up shipments significantly in the second half of the year. It should be borne in mind that the company does not have its own production facilities – from the very beginning it relies on contractors, which today, in addition to TSMC, include the world leader in the industry.
All of these processes can pose serious problems for Intel, the main supplier of data center chips that underpin enterprise networks and the entire Internet. Intel shares fell 5% on the back of NVIDIA stock growth, even as the latter is making significant efforts to meet demand for AI components. Eventually, NVIDIA turned out to be an unwitting participant in the US-China trade war – releasing special versions of its accelerators for Chinese customers to avoid violating sanctions imposed by Washington.