How a company whose name you probably can’t pronounce is now worth more than Apple

[JohnS]

How a company whose name you probably can’t pronounce is now worth more than Apple

Analysis by Elisabeth Buchwald, CNN, Thu June 20, 2024

Nvidia founder and CEO Jensen Huang speaks in San Jose, California, on March 18. Josh Edelson/AFP/Getty Images

New York (CNN) — It’s easy to grasp why Apple, Microsoft and Google are multitrillion-dollar companies: Just think about how many people around the world interact with the companies’ products and rely on them to go about their daily lives. But these multigenerational brand names are now trailing behind Nvidia, suddenly the most valuable public company in the world.

The tech behemoth, whose launch into AI chipmaking sent its stock into the stratosphere is hardly a household name. Many people can’t even pronounce it (it’s en-VID-eeyah, the company says on its website). It’s derived from the Latin word “invidia,” meaning envy, something many companies are undoubtedly feeling these days.

“I just read that it is now the world’s most valuable company, surpassing Microsoft. Why is that, because what does it do?” one user posted on Reddit on Tuesday. Many Nvidia investors who hopped on the train likely can’t explain what it does either.

With a market value of over $3 trillion, Nvidia is worth more than most countries’ entire economies. How did Nvidia get there?

Video games were just the start

Artificial intelligence wasn’t on the minds of Nvidia’s founders when they launched the company 31 years ago over a meal at Denny’s, where its CEO Jensen Huang worked at one point as a dishwasher. Their discussion revolved around finding a way to boost the processing capabilities of computers, especially graphics-intensive applications, Huang said in a recent interview that aired on CBS News’ “60 Minutes.” That was the impetus for Nvidia entering the graphics processing unit, or GPU, space in 1999. (While Nvidia popularized the term, it didn’t invent it, though it is often mistakenly credited with having done so.)

Nvidia’s GPUs revolutionized the gaming industry, bringing to market new games with movie-like visuals, whereas prior games were 2-D.

Eventually, the company took things one step further, creating a programming language that enabled developers to create applications to run on its hardware. By 2012, it discovered that its chips could be used to power much, much more than video games. Chief among those: artificial intelligence applications.

Still, the company remained relatively obscure to most investors and consumers — except for hardcore PC gamers.

That all changed in November 2022, when OpenAI announced ChatGPT, permanently altering people’s understanding of AI’s capabilities. The app’s stunning ability to mimic human speech and perform complex tasks shook Silicon Valley and Wall Street.

Staff introduce Nvidia GeForce series equipment on display at Computex in Taipei, Taiwan, on June 5. Ann Wang/Reuters

The winning ingredient (for now)

Suppose everyone collectively at the same time decided they don’t want to commute to work by driving or using mass transit. Instead, everyone is going to bike to work from here on out. Well, naturally demand for bikes is going to explode overnight. Want to get in on the action and start making bikes? You’re going to need a lot of steel. Nvidia is the steel of AI.

Now that just about every company, tech or not, is trying to find some way to use AI after OpenAI’s success made them look silly in comparison, everyone needs a lot of Nvidia.

It’s no wonder why it was the best-performing stock in the S&P 500 in 2023, gaining a whopping 239%. Up an additional 181% so far this year, it’s been the best-performing again.

All that demand for Nvidia chips surely must’ve increased competition, right?

Slowly but surely it has, with heavyweights like Meta, Amazon, IBM and Microsoft starting to play catchup. However, no company is close to Nvidia’s capabilities in the AI space, which is why it controls upwards of 70% of the market in AI chips.

Wall Street’s love affair with AI doesn’t seem like it’ll ever end. Could it all be one big bubble that’s bound to burst like the dot-com era? Maybe, but it seems less likely given the intrinsic value AI carries. All that means is demand for Nvidia chips isn’t going away any time soon — but competition will continue to grow more fierce.

And before we know it, another company with a name most people can’t pronounce will be referred to as the next Nvidia.

Source: https://edition.cnn.com/2024/06/20/investing/nvidia-most-valuable-company-explained/index.html

[cnov]

Yet another article that makes no mention of crypto mining at all.

GPU's are used to mine/run the networks of the vast majority of cryptocurrency out there. No doubt AI probably has a hand too, but it's a hell of a coincidence that NVIDIA previously peaked and plummeted alongside Bitcoin during and after the last bull run. Bitcoin is currently smashing it and the price of NVIDIA is also reaching even greater highs.

I'm no expert but I think there's a fairly obvious correlation going on. I think it would be a good gamble to short NVIDIA once this current Bitcoin bill run is through, knowing when that is over is the hard part though.

[Bijan]

5 hours ago, cnov said:

GPU's are used to mine/run the networks of the vast majority of cryptocurrency out there.

Bitcoin specifically uses custom chips rather than GPUs these days.

There are other cryptocurrencies that still use GPUs but it's not the huge driver of the market it once was.

Some of the AI chips/cards are selling for tens of thousands of dollars.

[cnov]

3 hours ago, Bijan said:

Bitcoin specifically uses custom chips rather than GPUs these days.

There are other cryptocurrencies that still use GPUs but it's not the huge driver of the market it once was.

Some of the AI chips/cards are selling for tens of thousands of dollars.

ASICs have been around for a long time but there are thousands of coins out there that are still predominantly using GPU's.

There were periods during the last bull run where there were limitations on the amount of cards people could buy as miners were simply buying bulk stock that made it hard for those that wanted to game to get hold of them.

If NVIDIA falls through the floor after this bull run it would hardly be surprising.

 

[Bijan]

1 hour ago, cnov said:

ASICs have been around for a long time but there are thousands of coins out there that are still predominantly using GPU's.

I agree that's still a considerable market.

But the current stock price is driven more by corporate/datacenter sales (and margins) than by consumer/gaming sales.