Nvidia price: AI boom and stock split sees shares surge past Apple as 2nd most valuable tech company - news

Nvidia has surpassed Apple to become the world's second most valuable company, with its stock exceeding the three trillion US dollar (£2.34 trillion) mark for the first time.

Nvidia's record-breaking shares contributed to Wall Street reaching an all-time high overnight, driven by the excitement surrounding artificial intelligence.

This surge in market value marks a significant milestone in the tech sector, with Apple having previously dominated since the launch of its iPhone in 2007.

Earlier this year, Apple lost its position as the world's most valuable publicly listed company to Microsoft, due to concerns over iPhone demand and Microsoft's investment in ChatGPT-maker OpenAI, which positioned it as a leader in generative AI.

Nvidia has now joined Microsoft and Apple as the only US stocks ever to top three trillion dollars in total value.

After share rises across the sector overnight, Microsoft is worth 3.15 trillion US dollars (£2.46 trillion), with Nvidia at 3.012 trillion US dollars (£2.35 trillion) and Apple at 3.003 trillion US dollars (£2.34 trillion).

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What is Nvidia?

Founded by Jensen Huang, Chris Malachowsky and Curtis Priem in 1993, Nvidia is an American multinational technology company headquartered in Santa Clara, California that is most known for designing graphics processing units (GPUs) for the gaming industry.

GPUs are specially designed chips that handle all the visual aspects of gaming, like making things look realistic and moving smoothly. They are much faster and more powerful than regular computer chips.

For decades, Nvidia’s GPUs have been crucial components in gaming PCs and consoles, providing high-performance graphics rendering for immersive gaming experiences.

The company continues to push the boundaries of graphics technology, introducing innovations like real-time ray tracing, which simulates how light interacts with objects in a scene to create incredibly lifelike reflections, shadows and lighting effects in games.

Why is it so valuable?

Now, Nvidia’s chips are also powering much of the rush into AI, which has seen it become a poster child of the AI boom, with demand for its processors from the likes of Google, Microsoft and Facebook owner Meta outstripping supply.

But long before the AI revolution, the company's co-founder gambled by investing in new Nvidia chip capabilities, expanding Nvidia's focus beyond gaming and venturing into AI and machine learning after recognising the potential of its GPUs for accelerating AI workloads.

Nvidia developed a specialised platform called CUDA (Compute Unified Device Architecture), which allows developers to harness the power of GPUs for general-purpose computing, including AI tasks.

Aside from gaming, Nvidia’s GPUs are well-suited for handling the large volumes of data and complex computations involved in AI tasks such as machine learning.

ChatGPT for instance, the 2022 release of which ignited the AI craze, was “trained” using 10,000 Nvidia GPUs gathered within a Microsoft supercomputer.

According to one report, the company has a monopoly on 95% of the machine learning business, and its hardware currently powers the majority of AI applications.

Additionally, Nvidia's GPUs have found widespread use in cryptocurrency mining, where their high computational power makes them attractive for mining cryptocurrencies such as Bitcoin and Ethereum.

Cryptocurrency mining involves solving complex mathematical problems continuously, which requires a lot of computing power.

Nvidia’s shares – up nearly 150% now so far this year – are also being boosted by an upcoming move to split its stock by 10-to-one on Friday (7 June).

A stock split is when a company divides its existing shares into multiple shares. For example, in a 2-for-1 stock split, each existing share is split into two shares.

The total value of the company remains the same, but the number of shares increases, and the price per share decreases proportionally. Stock splits are often done to make shares more affordable for investors, potentially increasing liquidity and attracting more investors.

Dan Coatsworth, investment analyst at AJ Bell, said the stock split will “bring its share price down and make it more affordable to investors who cannot afford to splash out more than a grand per share, as well as to benefit employees who use some of their monthly pay packet to invest in the company”.

Companies have so far been meeting Wall Street’s hopes for how much money the new tech will generate, which has helped to send stocks soaring – almost regardless of the broader US economic backdrop and what interest rates are doing.