ByDavid SwanJune 6, 2024 — 11.15amSaveLog in,registerorsubscribeto save articles for later.Save articles for laterAdd articles to your saved list and come back to them any time.Got itNormal text sizeLarger text sizeVery large text sizeAmerican chipmaker Nvidia has become the world’s second-most valuable company, surging past iPhone giant Apple thanks to the boom in artificial intelligence and rampant demand for generative AI products such as ChatGPT.Nvidia is now the hottest stock on Wall Street, having become the first computer chip company in the world to hit a $US3 trillion ($4.5 trillion) valuation. Nvidia’s shares climbed 5.2 per cent overnight to $US1224.40, giving the company a valuation of $US3.01 trillion to nudge ahead of Apple’s $US3 trillion.Nvidia has surpassed Apple’s market capitalisation.Credit:BloombergMicrosoft remains the world’s most valuable company, with a market capitalisation of $US3.15 trillion.The last time Nvidia was worth more than Apple was in 2002, five years before the first iPhone was released. At the time, both companies were worth less than $US10 billion each.Nvidia’s share price has skyrocketed in large part because of its flagship H100 computer chip, which powers the vast majority of large language models in use today, including OpenAI’s ChatGPT as well as offerings from Microsoft and Meta, the parent company of Facebook and Instagram.Founded in 1991, Nvidia was previously known as a somewhat niche tech company making graphics cards for gamers. It now finds itself squarely at the centre of the AI revolution reshaping the global economy, commanding an estimated 80 per cent market share in AI chips for data centres, and its shares have soared by more than 3000 per cent over the past five years.Apple, by comparison, is yet to fully capitalise on the AI wave and is grappling with subdued demand for iPhones. The company, which was the first to reach a $US1 trillion and $US2 trillion valuation, is expected to announce a partnership with ChatGPT maker OpenAI at a developer conference next week to catch up.Nvidia designs its own chips and they are manufactured by the Taiwan Semiconductor Manufacturing Company (TSMC) in Taiwan, which also makes specialised AI chips from Google, Amazon, Microsoft and other competitors. TMSC itself has a market capitalisation of about half a trillion US dollars and is one of the world’s most 15 valuable companies.AdvertisementTaiwan’s AI chip dominance has left other countries like the US and Australia racing to catch up and not be left out of the AI arms race.Nvidia chief executive Jensen Huang used a two-hour speech at the Computex tech expo in Taiwan this week to declare the “next Industrial Revolution has begun”.“Companies and countries are partnering with Nvidia to shift the trillion-dollar traditional data centres to accelerated computing and build a new type of data centre – AI factories – to produce a new commodity: artificial intelligence,” Huang said.Nvidia chief executive Jensen Huang: “A new computing age is starting.”Credit:APIn May, the company reported a $US14 billion profit in a single quarter, and said it would design new chips every year instead of once every two years. Demand is currently outstripping supply for Nvidia’s processors, with the company set to soon release its next-generation AI chip, H200, which the company says has superior memory capacity and bandwidth.“The next company who reaches the next major plateau gets to announce a groundbreaking AI, and the second one after that gets to announce something that’s 0.3 per cent better,” Huang said.“Do you want to be the company delivering groundbreaking AI, or the company, you know, delivering 0.3 per cent better?”LoadingThe company is planning a 10-for-1 stock split on Friday, a move that will affect its share price, but not its total valuation.Nigel Green, chief executive of deVere Group, one of the world’s largest independent financial advisory firms, said Nvidia’s stellar results underscore why “almost every investor needs exposure to AI”.“As the key player, Nvidia’s performance not only impacts its own valuation, but also sets the tone for the broader AI industry,” he said.​“AI has the potential to transform various industries, including healthcare, finance, transportation, and manufacturing,” Green added.​“The global AI market is expected to grow exponentially in the coming years, driven by advancements in machine learning, natural language processing and data analytics. Companies that adopt these technologies are likely to gain a competitive edge by automating processes, improving decision-making, and enhancing customer experiences.”LoadingBeing at the heart of the AI boom, it looks like Nvidia’s rally has a way to go still even after the recent gains.With analysts’ profit estimates for the company rising even faster than its share price, the stock remains attractive compared with other big tech names such as Microsoft that aren’t growing as fast, said Michael O’Rourke, chief market strategist at Jonestrading.“For a similar valuation, you’re getting so much greater growth with Nvidia,” he said. “There’s no competition for that kind of fundamental growth in a megacap company.”READ MORE:Stephen Bartholomeusz:The $3.1 trillion monster that took over Wall StreetCalum Jaspan, Olivia Ireland:News Corp boss defends $376m AI deal amid looming job cutsMatt O’Brien, Ali Swenson:Cats on the moon? Google’s AI tool is producing misleading responses that have experts worriedDave Lee:Apple’s tone-deaf iPad ad triggers our darkest AI fearsWith BloombergThe Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion.Sign up to get it every weekday morning.​SaveLog in,registerorsubscribeto save articles for later.License this articleAINvidiaSharemarketAppleWall StreetMicrosoftUSADavid Swanis the technology editor for The Age and The Sydney Morning Herald. He was previously technology editor for The Australian newspaper.Connect viaTwitteroremail.Loading