Nvidia now the world's most valuable company

Nvidia's huge growth has been fuelled by AI. Photo: Shutterstock

Graphics card maker Nvidia has surpassed Microsoft to become the most valuable company in the world, driven by huge demand for its chips to power the artificial intelligence revolution.

The NASDAQ-listed chip giant has seen its share price more than triple in this year alone, and a 3.5 per cent rise earlier this year brought its market capitalisation to $5 trillion ($US3.335 trillion) on Tuesday.

This officially made it the most valuable company in the world in terms of market capitalisation, leapfrogging Microsoft, which currently has a market capitalisation of $4.98 trillion ($US3.317 trillion).

It comes soon after Nvidia also surpassed tech giant Apple, which has a market cap of $4.93 trillion ($USD3.286 trillion).

The milestone caps an astronomical and unprecedented rise for the company that was founded three decades ago on the 30th birthday of its founder and CEO, Jensen Huang.

Nvidia’s high-end graphics processing units (GPUs) are playing a central role in the skyrocketing demand for the incorporation of artificial intelligence computing in a wide range of devices and services.

The company sells its AI chips to companies looking to embed AI applications, including Apple and Microsoft.

The demand for Nvidia’s chips has seen it enjoy huge growth across the last year, with its shares more than tripling this year, helping to add $165 billion ($USD110 billion) to its market capitalisation.

In that same time, Microsoft shares rose by 19 per cent.

The buying and selling of Nvidia shares currently accounts for more than 15 per cent of all trading in S&P 500 companies.

Nvidia’s rise to be the world’s most valuable company is an overnight success story that was 30 years in the making.

The company was founded by Huang in 1993 to incorporate 3D graphics into games through its graphics processing unit.

The company is not nearly as well-known as its more consumer-facing tech rivals, but its recent pivot towards artificial intelligence has fuelled its gigantic growth.

Nvidia has successfully transformed its chips from being just for gaming computers to being the bedrock for much of the AI tools and services being produced today.

The company has been masterful in positioning its computing chips at the centre of this AI revolution, and they are in high demand across the economy.

In recent years Nvidia has developed a platform to extend its chip capabilities beyond the gaming sector to support the complex computations that are needed for AI and deep learning.

It has in turn ensured that this platform was intertwined with its hardware offerings, driving the rapid growth in its chip sales.

Its journey has been bolstered by a series of tactical acquisitions, including the purchase of Mellanox Technologies for about $6.9 billion in 2020, which helped to grow its data centre capabilities.

Currently, it is the main winner from the growth in AI capabilities and interest, and its products are seen to be the building blocks for companies looking to capitalise on these opportunities.

Earlier this year, Nvidia unveiled the DGX GH200 AI supercomputer, which has 144 terabytes of shared memory.

While it is known for its AI chips, Nvidia is offering much more than just hardware, according to Baron Capital vice-president and portfolio manager Michael Lippert.

“They’re not just selling chips, they’re selling systems,” Lippert told Bloomberg.

“Nvidia’s GPU chips are in essence the new gold or oil in the tech sector as more enterprises and consumers quickly head down this path with the fourth industrial revolution well underway.”

Nvidia’s competitors have followed in its footsteps and looked to embrace AI, with Microsoft investing heavily in and partnering with OpenAI, and Apple recently unveiling a suite of products incorporating generative AI tools.