The US chipmaking company Nvidia Corp has achieved a significant milestone by entering the elite Wall Street Club with a market valuation surpassing $1 trillion. This makes Nvidia the first-ever chipmaking company to join this exclusive group. Prior to market opening on Tuesday, Nvidia’s shares rose by 3.8 percent, pushing its value to $1.03 trillion. The surge in value comes as Nvidia reported record sales and exceeded Wall Street expectations, attributing the growth to the booming artificial intelligence (AI) industry.
Nvidia primarily specializes in producing graphics processing units (GPUs), which are essential for powering generative AI platforms. The company accounts for approximately 80 percent of GPUs manufactured globally. The rise of generative AI, driven by OpenAI and Google, has been a significant factor in Nvidia’s success. As a result, Nvidia’s stock price has surged by over 180 percent this year. In fact, Nvidia mentioned that the rapid development of AI technology has greatly contributed to its earnings. The company’s positive forecast for the second quarter, anticipating sales of about $11 billion, has astounded analysts.
Nvidia’s projection for 2024 is equally impressive. The company expects 50 percent higher sales in the second quarter of that year compared to consensus estimates. Some analysts find this forecast “unfathomable” and “cosmological,” leading them to raise their price targets for Nvidia. The highest valuation reached about $1.6 trillion, positioning Nvidia on par with Google-parent Alphabet. However, experts caution that such a high valuation creates pressure for Nvidia to consistently deliver strong growth, which may result in share price volatility.
While Nvidia has historically been associated with gaming, the perception has shifted with the company’s involvement in AI applications. Nvidia’s GPUs are pivotal in platforms like OpenAI’s ChatGPT and Google’s Bard. The emergence of cryptocurrency mining and AI has expanded the demand for GPUs, benefiting manufacturers like Nvidia, AMD, and TSMC. In contrast, Intel has faced challenges with inventory management and has struggled to dominate the central processing unit (CPU) chip market, hindering its ability to attract investor interest. Nvidia’s foray into data center chip manufacturing has also threatened Intel’s market dominance.
Nvidia’s rise to prominence is remarkable considering its beginnings in the video game industry. Founded in 1993 by Jensen Huang, the company has become synonymous with AI due to its investments in the field over the past two decades. While other chipmakers are predicting a slowdown, Nvidia’s growth in AI-driven data center activities has counteracted the decline in video game revenues. Nvidia’s success exemplifies its ability to seize opportunities and capitalize on the AI boom.
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