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Getting your Trinity Audio player ready...
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Edited by: Fern Sidman
Nvidia has reached a significant milestone, with its valuation surpassing $1 trillion. This achievement positions Nvidia as the seventh U.S. company to attain such a valuation. The company’s stock has experienced a remarkable surge, rising by 181% this year alone, according to a recently published report in the Wall Street Journal. This impressive growth can be attributed to the booming field of artificial intelligence (AI) and its impact on computing, as highlighted by Nvidia’s CEO, Jensen Huang. The WSJ reported indicated that AI has spurred substantial investments from tech giants and startups, as they recognize the crucial role Nvidia’s semiconductors play in constructing powerful AI systems.
Nvidia now joins the ranks of other tech giants like Apple, Microsoft, Google’s parent company Alphabet, and Amazon.com, who have also achieved a $1 trillion valuation. The WSJ reported that Facebook’s parent company, Meta Platforms, and Tesla briefly reached this milestone in the past, although their share prices have since retreated. While Nvidia had crossed the $1 trillion mark during intraday trading on May 30, it closed below the required price of $404.858, the WSJ reported. However, on Tuesday, the stock closed at $410.22, securing Nvidia’s $1.01 trillion valuation.
The company’s journey began in 1993 when Jensen Huang, along with two engineers, founded Nvidia in San Jose, California. Initially, Nvidia focused on enhancing computer graphics. Huang faced skepticism from venture capitalists who doubted the potential of the PC gaming market, which he believed would thrive, the WSJ reported. Despite these doubts, Huang’s vision proved accurate in the 1990s and 2000s as Nvidia became a dominant player in providing high-resolution graphics chips for gamers.
In its early days, Nvidia was a design-focused company, relying on contract chip manufacturers like Taiwan Semiconductor Manufacturing and Samsung Electronics for production. The WSJ reported that Nvidia’s chips were renowned for their advanced processing capabilities, often at the forefront of the semiconductor industry.
Around 16 years ago, Nvidia took a significant turn when Huang expanded the purpose of the company’s chips beyond computer graphics. The WSJ reported that scientists and engineers started utilizing Nvidia’s chips for physics simulations, eventually leading to their adoption in AI calculations. The chips demonstrated exceptional proficiency in AI-related tasks. In recent years, Nvidia has further diversified its business by supplying chips for AI-powered features in automobiles, particularly self-driving capabilities.
Nvidia’s data-center business, focused on AI applications, has now surpassed its gaming division as the primary revenue source. The WSJ also reported that Nvidia’s chips are instrumental in the AI calculations that underpin sophisticated language-generation systems, typically operating within vast server farms. The company’s robust performance is evident from its announcement that it expects to register approximately $11 billion in sales for the current fiscal quarter, surpassing analysts’ expectations, as was reported by the WSJ.
Huang said at a recent conference in Taiwan that the computing world was at the dawn of a new era tailored to AI’s growth, with Nvidia’s graphics processors at the center, the WSJ reported. Under Huang’s vision, that era represents a break from an older model that relied heavily on the central processing unit as the computational workhorse.
“Every single computing era, you could do different things that weren’t possible before,” he said, according to the WSJ report. “And artificial intelligence certainly qualifies.”
Huang envisions a new era for computing, specifically tailored to the growth of AI, with Nvidia’s graphics processors at the forefront. This era signifies a departure from the previous model that heavily relied on the central processing unit (CPU) as the main computational workhorse. Huang emphasizes that each computing era unlocks new possibilities, and artificial intelligence undoubtedly falls within this category.
The complex mathematics required to build advanced AI systems aligns better with the capabilities of graphics chips compared to other semiconductors. According to the WSJ report, graphics chips excel in performing numerous calculations simultaneously to determine each pixel’s appearance on a screen, whereas CPUs prioritize fewer calculations but aim for maximum speed.
Nvidia’s recent stock surge can be attributed to the increasing interest in AI tools since late last year, including OpenAI’s ChatGPT. The WSJ reported that the substantial investments made in these systems have created a surge in demand for Nvidia’s chips, which industry analysts anticipate will continue. The widespread adoption and recognition of AI’s usefulness, demonstrated by ChatGPT, have fueled investors’ enthusiasm for the profit potential associated with the AI explosion. As a result, the Nasdaq Composite Index has outperformed the broader stock market, contributing to substantial gains for major tech companies worldwide, according to the WSJ report.
While Advanced Micro Devices (AMD) historically stood as Nvidia’s main competitor in high-end computer graphics chips, AMD has also entered the AI chip market. Recently, AMD announced a new generation of processors to pose a more formidable challenge to Nvidia. The WSJ also reported that Intel is another significant rival, manufacturing its own graphics processors for AI and enhancing its central processors to better handle AI calculations. Additionally, several startups are emerging in the AI chip industry, while large cloud-computing companies like Google and Amazon.com have been developing their AI chips for years.
Despite the competitive landscape, Nvidia holds a significant advantage as the first major chip company to target AI specifically, according to the WSJ report. Huang acknowledges the constant need to be mindful of competition but remains confident in Nvidia’s position in the market.
