Forget Microsoft and Apple, the stock market has a new king.
Nvidia on Tuesday surpassed two of technology's most talked-about names to become the world's most valuable public company, according to data from S&P Global. Its gain is driven by a boom in generative artificial intelligence and rising demand for the company's chips — known as graphics processing units, or GPUs — that make it possible to build AI systems.
Nvidia's growth is one of the fastest in the market's history. Just two years ago, the company's market valuation was over $400 million. Now, in the span of a year, it has grown from $1 trillion to over $3 trillion.
Nvidia's stock rose 3.6 percent on Tuesday, giving it a market value of $3.34 trillion. Microsoft and Apple both declined, ending the day lagging the Silicon Valley chip maker.
Years before the other major chip companies, Nvidia CEO Jensen Huang predicted that GPUs would be essential to building artificial intelligence, and positioned his company to be the next big boost in technology.
His big bet is paying off. By some measurements, Nvidia controls more than 80 percent of the market for chips used in AI systems. Nvidia's biggest customers regularly vie for orders of chips to run the computers in their massive data centers, and are building their own AI chips so they aren't so dependent on a single supplier.
“Nobody else fully saw or appreciated this,” said Daniel Newman, chief executive of tech research firm Futurum Group. “They saw the trends, built for the trends and enabled the market. They can effectively charge whatever they want.”
Nvidia's rise has made Mr. Huang a celebrity in the tech world. After a computer conference in Taiwan earlier this month, he was surrounded by attendees wanting his autograph, including a woman who asked him to sign her chest.
The company's rise is reminiscent of dot-com era giants such as Cisco and Juniper Networks, which made equipment that ran communications networks for the Internet. Cisco's shares rose more than a thousandfold between its initial public offering in 1990 and 2000, when it briefly became the world's most valuable company.
The speed at which Nvidia's value has grown is astonishing. Apple surpassed $1 trillion in August 2018 and became the first $3 trillion company last June. Microsoft also took about five years to go from $1 trillion to $3 trillion.
But Nvidia's investors are betting more on its potential than its current profits. Microsoft and Apple earn more than $85 billion in annual profits, while Nvidia earns $42.6 billion.
“The numbers have gotten so big so quickly that people are worried: Is this sustainable?” said Stacey Rasgon, an analyst at Bernstein Research. “If the return on AI isn't there, the whole thing collapses.”
This is a developing story. Check back for updates.