Apple and Microsoft, two iconic giants since the 1980s, were the first companies to cross the $3 trillion market capitalization threshold in the past two years. However, the third company to reach this milestone would likely have surprised even the most seasoned investors a decade ago.
An article by Hank Tucker for Forbes US – translated by Lisa Deleforterie
Last week, Nvidia reached $3 trillion in market capitalization, just three months after crossing the $2 trillion mark, marking another milestone in a bullish cycle that shows no signs of slowing. The semiconductor designer has been the main beneficiary of the generative AI boom since the introduction of ChatGPT in November 2022, increasing its share price eight-fold since that date.
Headquartered in Santa Clara, California, Nvidia wasn’t even among the top 1,000 companies in the Forbes Global 2000 ranking of the world’s largest public companies until 2017. However, it has steadily climbed that ranking, reaching this year 110e place, an increase of 131 places compared to last year. The Forbes Global 2000 ranking weights market value, revenue, profits and assets equally, using data from the trailing 12 months through May 17. Although Nvidia is still behind hundreds of companies in terms of revenue and total assets, if it continues to maintain its current growth rates, it won’t be long before it climbs much higher in the rankings.
“ The next industrial revolution has begun said Jensen Huang, founder and CEO of Nvidia, whose fortune has reached $100 billion (net worth), during the first quarter earnings conference call in May. “ Companies and countries are partnering with Nvidia to transform traditional, trillion-dollar data centers into centers for accelerated computing. They are also building a new type of data center, called “artificial intelligence factories,” to produce a new resource: artificial intelligence. »
Nvidia’s $61 billion in profits in its most recent fiscal year, which ended in January, more than doubled from the previous year, and its margins are unmatched among companies of its scale, with $30 billion in net profits. Its growth rate accelerated in the first quarter that ended in April, recording $26 billion in revenue, an increase of 262% from the previous year, and $15 billion in profit. net in a single quarter. At the same time, total assets increased by 17%, reaching $77 billion. These figures, released on May 22, were recorded too late to be included in the Forbes Global 2000 rankings. However, they would have easily propelled Nvidia into the top 100.
“ These growth figures are generally those of a start-up. Let’s be realistic, we don’t see triple-digit growth rates in established companies said Harsh Kumar, semiconductor analyst at Piper Sandler. “ Here you have a company that will make $100 billion in the fiscal year of January 2025 and it’s growing at that rate. »
Nvidia’s growth is almost entirely due to its dominance in the design of graphics processing units (GPUs), which account for the majority of its revenue. In 2006, the company developed proprietary CUDA technology, which became the standard for GPU programming. Before the recent AI rush, these chips were primarily used for graphics rendering, video editing, and visualizations in games. Capable of quickly processing large amounts of information in parallel, their usefulness later extended to applications such as voice translation or tracking direction on a map during a journey. Today, with generative AI creating many new use cases requiring high computing power, demand for Nvidia’s GPUs has exploded.
The race for dominance in the semiconductor industry
A few other companies have taken advantage of Nvidia’s rise to become secondary players in the GPU market, including Advanced Micro Devices (AMD). AMD rose more than 200 places to reach 343e rank in the Forbes Global 2000. In April, AMD’s billionaire CEO Lisa Su announced that the company expected to generate $4 billion in revenue for data center GPUs this year. Although this figure is well below Nvidia’s projected $100 billion in this category, it is still the second highest in the industry. AMD stock is up 25% over the past year and 150% since the start of 2023. AMD’s market cap is $260 billion.
Intel, the chipmaker founded in 1968 that developed the x86 architecture widely used in computers, is number 107 on the list and has rebounded 315 places after falling to 422eplace last year due to inventory restructuring and other accounting adjustments that impacted its profitability last year. Intel still leads Nvidia mainly due to its $193 billion in total assets, although its revenue of $55 billion was down slightly from last year, and its market capitalization is stagnant at $135 billion. dollars. Intel’s market capitalization peaked at over $500 billion in 2000, during the dot-com bubble, and the company was 65e place in the inaugural Forbes Global 2000 ranking in 2003, but has since lost its influence. Intel has started making integrated GPUs for computers, but not on the same scale as Nvidia.
“ Nvidia has been making GPUs for over 20 years, with all the associated software and a team of experienced developers, which has given it a huge advantage. They hold between 90 and 95% market share “, says Louis Miscioscia, analyst at Daiwa Capital.
Broadcom, another Silicon Valley veteran founded two years before Nvidia in 1991, has adapted more easily to the new semiconductor landscape and maintains lucrative contracts for custom chips with tech giants like Google and Meta. Last November, the company closed a $69 billion deal to acquire cloud computing company VMWare. Since the start of 2023, Broadcom’s stock has risen 165%, bringing its market capitalization to an all-time high of nearly $700 billion. This performance allowed Broadcom to climb 60 places to reach 74e position of the Forbes Global 2000 this year.
“ Broadcom takes a unique approach: it doesn’t produce over-the-counter chips, but instead works with specific customers “, explains Mr. Kumar. “ Overall, I would consider Nvidia as the leader, followed by Broadcom in second and AMD in third in the GPU space. Intel would be far behind in fourth place. »
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