The company’s shares climbed 3.5 per cent to $135.58 on Tuesday, bringing its market capitalisation to $3.335tn and surpassing the two tech giants that have long jostled for pole position on US stock markets.
Nvidia's journey is nothing short of a technological revolution. It has swiftly transitioned from a $300bn company grappling with a chip glut exacerbated by a cryptocurrency bust to one of the most powerful tech companies in the world. Its chips, capable of training and running powerful generative AI models, have become the go-to choice for Silicon Valley giants, a testament to its market dominance.
The sheer magnitude of Nvidia's share price gains is staggering. Its single-handed contribution of about a third to the 14 per cent year-to-date increase in the benchmark S&P 500 index is a testament to its market influence. This rally has even surprised bullish observers, underlining the company's exceptional performance.
Tech strategist at Baird Ted Mortonson said that there are many drivers for the stock price, but 40 per cent is not normal, and he blames human emotions for getting the better of investors.
Nvidia was founded 31 years ago to build computer graphics cards for video gamers, the Silicon Valley-based company has seen successive quarters of huge revenue growth in the past year. It announced a year-on-year increase of 265 per cent in February and 262 per cent in May. Its shares are up roughly 170 percent since the start of the year.
Nvidia chief executive Jensen Huang declared that the company is at the centre of a new “industrial revolution”, unleashing the power of generative AI to transform all sectors of the global economy with intelligent computing.
Google, Microsoft and Amazon have all purchased its Hopper series of graphic processing units for their cloud services. Nvidia’s software ecosystem, Cuda, which offers tools for developers using its chips, cements its dominance.
Meanwhile, it is rolling out its new generation of more powerful Blackwell chips, with Huang promising a “one-year rhythm” of new releases. Competitors like AMD and Intel have launched competing AI chips but have yet to eat into Nvidia’s commanding market share meaningfully.
Bernstein chip analyst Stacy Rasgon said that somebody’s got to be number one, and it’s not like the stock for Nvidia has run up all by itself — the financials have run up even more.
“I’ve never seen anything quite like this in terms of the actual economics that are driving it. It’s amazing.”
The race to capitalise on the opportunity from generative AI has swept across the tech sector. Even the conservative and dull fruity cargo cult Apple joined in at its annual developers' conference last week, announcing its Apple Intelligence will be embedded in its new operating systems and signing a major partnership deal with OpenAI.
Nvidia’s growing sway over broader stock indices has stoked concerns about the market rally's long-term sustainability. Still, few analysts or investors are predicting a reversal in the short term.
Fiduciary Trust chief investment officer Hans Olsen said the market’s top-heaviness is really concerning as it had not been like this since 1999.
“ But if you think back to the tech bubble that went from 1997 until March 2000, it had a long runway. This one still has runway, too.”