Nvidia becomes the first chip company worth $1 trillion

Background

Nvidia was founded in 1993 by Jensen Huang, who is still its chief executive ^[3]. For most of its history the company sold graphics processors: chips designed to draw images on a screen. A central processing unit has a small number of cores and works through long chains of instructions one step at a time; a GPU is built from many small cores that run at once on large batches of simple, similar arithmetic. Training a neural network is exactly that kind of work, which is why a chip built for images turned out to suit AI computing.

A year before the milestone, Nvidia was not near the top of the US market at all: its market value was still below $1 trillion, and it ranked towards the end of the list of American tech giants ^[1].

Market value is the share price multiplied by the number of shares, so the figure records what investors will pay on a given day for a company's future profits; it is not cash the company holds. A trillion-dollar valuation is therefore a snapshot of one trading day, and it moves as the share price does.

What happened

On 30 May 2023 Nvidia's market value passed $1 trillion for the first time, making it the first chip company in the US stock market to reach that level ^[1].

Where the demand came from

The milestone came amid a surge of demand for the GPUs used to train large AI models, after the release of ChatGPT ^[1][2]. Training a language model means showing it very large amounts of text so that it gets better at predicting what comes next. The process can be described roughly as a loop of two steps: the model makes a prediction on a batch of data, and its parameters are then adjusted according to how far the prediction was from the right answer. The loop runs an enormous number of times, and each pass repeats the same operations over huge batches of numbers, which is the workload GPUs are built for. Serving a trained model to users, so-called inference, is a second and continuing draw on the same hardware. Under Huang, Nvidia's H100 and Blackwell processors became the engines behind the large language models that power tools such as ChatGPT ^[3].

How fast it went

The stock had risen nearly 240% in 2023 and would rise more than 170% in 2024 ^[2]. The pace is clearest in the next milestone: from $1 trillion in May 2023, Nvidia took only about a year to reach $3 trillion, while Microsoft had taken six years to make the same move and Apple nearly four ^[1][2].

What the milestone showed

Setting Nvidia beside Microsoft and Apple is a way of saying what was unusual about it. Both of those companies built their valuations out of broad platform businesses assembled over decades; Nvidia got there mainly on sales of one class of product, the accelerator used for AI computing. Within roughly a year it went from below $1 trillion and towards the end of the list of US tech giants to the front of that list ^[1]. The first chip company across the line also pointed to where a large share of AI spending was going: to the hardware that trains and runs the models.