Nvidia Corp. has once again become a major talking point. The company, which briefly claimed the top position as the largest publicly traded U.S. company by market capitalization on June 18, is making a swift comeback toward that coveted spot.
Currently, Apple Inc. holds the top position with an intraday valuation of $3.52 trillion, just slightly ahead of Nvidia’s $3.48 trillion as of the latest trading update. For Nvidia, this battle to the top reflects its central role in the AI revolution, as its chips power much of the industry’s most advanced computing.
Despite having dropped to a market cap of $2.43 trillion in August, Nvidia bounced back impressively, regaining over $1 trillion in market capitalization within just three months.
To put this into perspective, only six U.S. companies even surpass the $1 trillion mark at all. This remarkable recovery, driven by rising demand for Nvidia’s advanced graphics processing units (GPUs) and the anticipated success of its upcoming Blackwell processors, showcases how the company has entrenched itself as a backbone of the AI industry.
What’s driving Nvidia’s surging value?
The surge is attributed primarily to Nvidia’s dominance in the AI hardware sector. As a result of its strong foothold, the company’s GPUs have become essential for powering AI servers, especially in the growing cloud computing and data center markets.
Nvidia commands an estimated 80%–85% share of the AI chip market, giving it a near-monopolistic grip in this high-demand space, which analysts estimate could reach $400 billion in the coming years. Bank of America recently raised its price target for Nvidia from $165 to $190, projecting an additional 38% stock surge.
BofA analysts express confidence in Nvidia’s potential: “We continue to believe capital expenditures are as defensive as they are offensive, and that cloud vendors could have increasing propensity to spend.”
Nvidia’s latest processors, known as Blackwell, represent a monumental step forward for the company. These chips are designed to deliver 4 times the AI training capacity and 30 times the inference speed of their predecessors, the Hopper chips.
Nvidia’s resurgence is fueled in large part by partnerships with hyperscale cloud providers, such as Amazon Web Services, Microsoft Azure, and Google Cloud, all of which are increasing investments in AI infrastructure to stay competitive.
These providers are expected to collectively spend over $50 billion annually, investing in the hardware that supports AI-powered applications. Cloud service providers must continuously expand their AI capabilities to meet demand from businesses integrating machine learning, natural language processing, and advanced automation into their operations.
According to a McKinsey report, generative AI could add as much as $4.4 trillion in annual value across industries. From automated customer service to enhanced data processing, companies are seeing AI as indispensable to future success. Nvidia’s dominance in AI chips positions it uniquely to benefit from this trend.
A Promising horizon in AI market growth
As AI applications expand across sectors like healthcare, finance, and logistics, the AI accelerator market alone could be worth $280 billion by 2027. Nvidia’s GPUs, the brains behind many of these applications, accounted for a substantial $42 billion in revenue this year.
If Nvidia retains a 75% market share, revenue from AI accelerators could surpass $210 billion by 2027—a staggering leap from today’s levels.
In a recent update at the RISC-V Summit, Nvidia shared that it’s been replacing its proprietary microcontroller cores with the open-standard RISC-V architecture since 2015, enhancing performance, functionality, and security across its GPUs.
This architectural shift, now embedded in virtually all Nvidia chips, allows for custom optimizations that suit Nvidia’s specific processing needs, aligning with its goal of universal deployment across diverse products. In 2024 alone, Nvidia is on track to ship around one billion RISC-V cores.
While Nvidia’s growth story is impressive, it hasn’t been without setbacks. Production of the Blackwell chips faced delays earlier this year due to a design flaw.
Jensen Huang acknowledged the error, which initially hampered manufacturing yields. However, after working closely with Taiwan Semiconductor Manufacturing Company, the issue has been resolved, and Nvidia expects shipments to resume in the final quarter of 2024.
“It was functional, but the design flaw caused the yield to be low. It was 100% Nvidia’s fault.” said CEO Jensen Huang
The road ahead: Can Nvidia maintain its lead?
The ongoing AI race isn’t just a flash in the pan. Analysts estimate that Nvidia’s earnings could grow at an annual rate of 57% over the next five years.
Such growth could see Nvidia’s stock reaching or surpassing its current price target, giving it ample room to grow as demand for AI applications continues to accelerate.
While other tech companies are also developing advanced AI hardware, Nvidia’s early entry and scale in this space give it a significant advantage.
For investors, Nvidia remains a prime contender for growth in an AI-centric world, as demand for high-powered processors continues to push the company’s capabilities and market value to unprecedented heights.