The AI darling Nvidia’s shares jumped 3.5% to $135.58 per share on Tuesday, pushing its market valuation to $3.34 trillion, surpassing Apple and Microsoft to become the world’s most valuable company. Microsoft is now in second place with a valuation of $3.32 trillion, followed by Apple at $3.28 trillion.
The price surge was triggered by news that the chipmaker may secure a 20% weighting in the technology select sector SPDR Fund (XLK) in the S&P 500 based on valuation rules. This could potentially lead to more than $10 billion of Nvidia’s shares being acquired by the Exchange Traded Fund (ETF).
Nvidia’s share price has climbed 12% since its 10-for-1 share split started trading on 10th June, and is up 170% year-to-date, while Microsoft’s shares have risen by 20% and Apple’s stocks by 15% this year. Its shares have soared approximately 591,000% since the company went public in 1999.
Nvidia has emerged as the biggest AI winner since 2023, thanks to its advanced Graphic Processing Units (GPUs), which specialise in supercomputing capabilities supporting generative AI training. Its revenue nearly quadrupled in the fiscal first quarter of 2025.
The company holds a monopolistic position in AI chip manufacturing, accounting for approximately 80% of the market share. Its customers include all the major tech players, including Microsoft, Amazon, Meta Platforms, Alphabet, and OpenAI. CFO Colette Kress revealed that approximately 45% of Nvidia’s data centre revenue stemmed from these cloud providers.
Nvidia has launched a new supercomputing AI GPU, Blackwell, which is expected to spearhead the company's growth in the coming year. CEO Jessen Huang also expressed his ambition to advance its product offerings across various sectors, including consumer internet companies, automotive manufacturers, and healthcare providers, rather than solely focusing on cloud businesses.
A glance at Nvidia’s history
Nvidia was founded in 1993 in Sunnyvale, California, United States. CEO Jensen Huang is one of the three co-founders, who was the director of CoreWare and a microprocessor designer at Advanced Micro Devices (AMD). The company’s core product is its graphics processing units (GPUs), specialised electronic circuits designed to accelerate the rendering of images and videos in the early years.
Instead of relying on prominent sales revenue from its data centre, Nvidia initially gained market share in the gaming industry through deals with Microsoft’s Xbox in 2000 and Sony’s PlayStation in 2004. Nvidia joined the S&P 500 in 2001. However, the dot-com bubble crashed its shares by nearly 90% between January and September 2002. After several years of recovery, boosted by GPU sales and the creation of the CUDA platform, Nvidia’s shares soared by 635% from late 2004 to a peak in 2008 before the GFC happened.
CUDA, a parallel computing platform and programming model introduced in 2006, enabled Nvidia to enter the data centre market by leveraging Nvidia GPUs for general computing tasks, crucial for AI and deep learning applications. Nvidia’s sales of supercomputing chips were once again bolstered by cryptocurrency mining in 2017 and 2020. During the covid period, revenue from its gaming sector surged, pushing its market valuation to surpass Intel.
Nvidia’s shares fell by 67% from their peak in 2021 to October 2022, when the Fed began its aggressive rate hikes. However, the AI frenzy initiated by Microsoft in 2023 caused sales of its advanced AI chips to explode in the past year.
Is Nvidia being overvalued?
Nvidia holds a Price-to-Earnings Ratio of 78, the highest among the trillion-dollar market cap club. Meanwhile, its dividend yield is as low as 0.03%, marking it as a typical growth company. Nvidia has to keep billions of dollars in investment to maintain its market share. Some analysts believe its market value could surpass $4 trillion in the foreseeable future.
With annual revenue growth exceeding 200%, Nvidia’s shares are considered reasonably valued. However, the company's shares have rallied too rapidly, which could lead to a profit-taking moment.
