Why Nvidia May Become The 6th Company Worth $1 Trillion

Why Nvidia May Become The 6th Company Worth $1 Trillion


As Nvidia’s market valuation approaches $1 trillion, experts credit its participation in the AI boom through its graphic processing units.

Key Facts

Nvidia’s earnings report estimated $11 billion in sales for the second quarter, more than 50% higher than analysts’ predictions—it also reported $7.19 billion in revenue in the first quarter, $67 million higher than expected and up 19% from the previous quarter.

According to Reuters, the company’s shares have risen over 160% this year, adding $586 billion in market value and making it the fifth most valuable U.S. company.

Nvidia’s market capital is closing in on $1 trillion, a feat that only five other companies have accomplished: Apple, Amazon, Google’s parent company Alphabet, Microsoft and Saudi Aramco

The company creates graphics processing units (GPU), and it’s estimated Nvidia owns 95% of that market.

Key Background

Nvidia was founded in 1993 and had its start making video game GPUs, which are cards gamers typically plug into computers to help handle graphics-related tasks, like effects and videos. However, it was discovered GPUs can also be used in deep learning AI. Deep learning is a component of AI that teaches computers to process data in a complex way inspired by how the human brain works. This includes recognizing intricate patterns, sounds, pictures, text and other data to create accurate insights and predictions. Soon, tech giants like Amazon, Google, Meta and Microsoft began buying Nvidia’s chips for their processing data, and institutions like Massachusetts General Hospital started using Nvidia chips to spot anomalies in medical images like CT scans. Tesla even unveiled its supercomputer that uses Nvidia’s chips to power its autonomous vehicles in 2021. On Wednesday, Nvidia revealed a new class of GPUs that reportedly run at twice the speed of the previous ones. This, along with the company’s impressive market performance, led Bank of America analysts to call Nvidia an “unquestionable AI leader” in a recent report.

The Ai Boom

OpenAI’s launch of its chatbot ChatGPT in November 2022 sparked the recent generative AI boom. Generative AI are algorithms that can be used to create new content, like images, text, videos and audio. Since ChatGPT’s launch, many companies have joined the chatbot craze, including Google, Snap and more recently, TikTok with its chatbot Tako. GPUs play an important role in generative AI by helping to accelerate the training of models and enabling them to learn from larger datasets. In March, Google announced the continuation of its partnership with Nvidia to provide GPUs to organizations who don’t have the access to build generative AI models. Elon Musk has even reportedly purchased thousands of GPUs to run a new generative AI project in April, according to Insider, though the source of the GPUs is unknown.

Crucial Quote

Bank of America analyst Vivek Arya says the company’s guidance amounts were clearly “driven by the start of major data center investments in generative AI and large language models.”

Big Number

$34.7 billion. That’s how much Forbes estimates Jensen Huang, co-founder and CEO of Nvidia is worth following Thursday’s rise of the company’s share price. This places Huang as the 36th-wealthiest person in the world, according to Forbes’ data.

Further Reading

Bigger Than Amazon? Nvidia Stock Surges After ‘Cosmological’ Profit Projections (Forbes)

Nvidia Nears $1 Trillion Market Capitalization—Closing In On These Other Companies (Forbes)

Here’s What To Know About OpenAI’s ChatGPT—What It’s Disrupting And How To Use It (Forbes)

What do you think?

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