Nvidia, the California-based technology giant, has hit staggering new heights thanks to booming demand for its graphics processing units (GPUs) used in artificial intelligence systems. This week, Nvidia briefly surpassed a market valuation of $2 trillion – nearly rivaling Canada’s entire GDP.
Just eight months ago, Nvidia was valued around $1 trillion. Its exponential growth rate is being characterized as the fastest ever among U.S. companies. Nvidia reached the $2 trillion milestone in less than half the time it took Apple and Microsoft to hit the same benchmark.
The latest boost came after Nvidia posted yet another strong earnings report, spurring a single-day $277 billion surge in its market cap on Thursday – the largest one-day gain ever recorded on Wall Street. Nvidia now boasts a higher valuation than retail giant Amazon or Google’s parent company Alphabet.
“Demand is surging worldwide across companies, industries and nations,” said Nvidia’s founder and CEO Jensen Huang.
From PC Gaming to AI Dominance
Nvidia originally made its name developing graphics processing units (GPUs) for video games and personal computers. Its technology now powers major devices like the Nintendo Switch.
But it turns out those same GPUs are extraordinarily well-suited to run the complex algorithms required in AI and machine learning applications.
“Researchers discovered that the graphics chips Nvidia was developing lent themselves very well to running AI algorithms. That gave them a really big head start,” said Emil Savov, Managing Director of Ontario’s MaRS Investment Accelerator Fund.
Today, Nvidia holds an estimated 80% market share for AI accelerators with scarce competition. The company is predicting massive growth as AI and machine learning are more broadly adopted across industries.
“Nvidia has, I think, an 80 per cent market share, really no competition at the moment. And the company [has predicted] really tremendous growth from AI workflows going forward. And they think we’re just getting started,” said Barry Schwartz, portfolio manager at Baskin Wealth Management.
However, some tech giants like Google, Amazon and Microsoft are working to develop their own AI chips to reduce reliance on Nvidia. But even if competitors ramp up production, analysts see booming demand for AI hardware that can sustain multiple players.
“I still think in five years or ten years, we will be talking about numbers that are materially higher than what we’re talking about today,” said Stacy Rasgon, a semiconductors analyst with Bernstein Research.
Rasgon foresees a “very long and very robust” upward trajectory for computer chip manufacturers tapping into AI, machine learning and other leading-edge technologies. But he notes Nvidia has cautioned that supply chain issues could hamper its production capacity, which is lagging voracious demand.
Sustained Growth Expected
Unlike previous Nvidia boom cycles around cryptocurrency mining, experts believe interest in its core technology will remain red hot for the long term.
“The fundamental difference here, not just [for] Nvidia alone, is the use case,” explained Gennady Pekhimenko, Associate Professor of Computer Science at the University of Toronto.
Pekhimenko highlights that AI now broadly powers smartphones, cloud computing, conversational AI models like ChatGPT and more. And demand from these consumer and enterprise applications will sustain over many years.
“We use it on our phones already. We use it in the cloud. We use things like ChatGPT. We use facial recognition features in our phones,” he said. “I see how humongous the demand is for it… [Nvidia] are operating at the limit of what they can manufacture really. And I think they will manufacture more.”
