On Tuesday, Nvidia unseated Microsoft Corp. as the world’s most valuable company with a market capitalization of US$3.34 trillion, with more than US$2 trillion of that value added this year. The company's rise is partly due to the financial mania around artificial intelligence (AI) and how investors see Nvidia — which makes the cutting-edge chips powering the technology — as the biggest winner of the boom. However, sustaining the current rally will require customers to continue spending billions of dollars a quarter on AI equipment, whose returns on investment are so far relatively small.
Key takeaways:
- Nvidia Corp. has become the best-performing stock of the past quarter-century, posting a total return of 591,078 per cent since its initial public offering.
- On Tuesday, Nvidia unseated Microsoft Corp. as the world’s most valuable company with a market capitalization of US$3.34 trillion.
- Nvidia's rise was due to its big bet on graphics chips and the vision of co-founder and chief executive Jensen Huang that the industry would shift to what he calls “accelerated computing.”
- Long-time investors in Nvidia have had to stomach three annual collapses of 50 per cent or more in the stock. Sustaining the current rally will require customers to keep spending billions of dollars a quarter on AI equipment, whose returns on investment are so far relatively small.