Nvidia Surpasses Microsoft as World's Most Valuable Company

On Tuesday, Nvidia (NVDA) surpassed Microsoft (MSFT) to become the world’s most valuable company, just two weeks after overtaking Apple (AAPL) for the No. 2 spot.

Nvidia’s stock price increased by approximately 3.5%, surpassing $135 per share and pushing the chipmaker’s market capitalization beyond $3.33 trillion. In contrast, Microsoft experienced a 0.4% decline, bringing its market cap to nearly $3.32 trillion. Over the past 12 months, Nvidia shares have soared more than 215% and over 3,400% in the last five years. Year-to-date, Nvidia has gained 175%, whereas Microsoft’s stock has risen by just under 19% in 2024.

Nvidia first achieved a $1 trillion market cap on June 13, 2023. It crossed the $2 trillion mark on March 1 and swiftly reached the $3 trillion threshold for the first time on June 5, setting a record for the fastest ascent from $1 trillion to $3 trillion. Nvidia’s rise has significantly influenced the S&P 500 (^GSPC), significantly contributing to the benchmark index’s record highs in 2024.

Until May, the S&P 500’s movements were closely tied to Nvidia’s stock price, with Nvidia’s gains accounting for about one-third of the index’s year-to-date rise, according to Citi’s equity research team.

Impact of AI Boom

Nvidia executed a 10-for-1 stock split on June 10. Its remarkable growth coincides with the generative AI boom that began with OpenAI’s ChatGPT launch in late 2022. Nvidia’s specialized chips, modified graphics cards, and CUDA software platform are integral to training and running AI programs, providing a strategic edge over rivals AMD (AMD) and Intel (INTC).

Nvidia is the preferred supplier of AI chips and integrated software for tech giants like Amazon (AMZN), Google (GOOG), Meta (META), Microsoft, Tesla (TSLA), and others. It powers a wide range of AI applications, from cloud-based services to proprietary models.

At the Computex conference in Taiwan on June 2, CEO Jensen Huang announced the release of the high-powered Blackwell Ultra chip in 2025, followed by the Rubin AI chip platform in 2026 and its Ultra version in 2027.

In Q1, Nvidia reported adjusted earnings per share of $6.12 on revenue of $26 billion, reflecting jumps of 461% and 262%, respectively, from the previous year. The company’s data centre revenue soared 427% year-over-year to $22.6 billion, making up 86% of total revenue. Meanwhile, its gaming segment, previously its primary business, generated $2.6 billion.

Rivalry Among Tech Giants

Despite Nvidia’s dominance, AMD and Intel are advancing their AI chip efforts. AMD recently announced that its MI325X and MI350 will hit the market in 2024 and 2025, respectively, and said its next-generation MI400 AI accelerator platform will land in 2026.

Intel, meanwhile, said its Gaudi 2 and Gaudi 3 AI accelerators will undercut competing chips on price. Price savings will undoubtedly be welcomed with companies spending billions on AI chips.

Nvidia also faces increasing competition from its customers, as Amazon, Google, and Microsoft aim to reduce their reliance on Nvidia’s chips to lower capital expenditures.