Red-hot artificial intelligence chipmaker Nvidia Corp. has finally achieved what many thought was only a matter of time, surpassing Microsoft Corp. to become the most valuable publicly traded company in the world.

The value of Nvidia’s stock gained more than 3.6% in trading today, pushing its market capitalization to $3.34 trillion. With that, it finally overtook Microsoft, whose stock fell 0.5% today, leaving it with a market cap of $3.32 trillion.

The new milestone comes just days after Nvidia’s market cap topped $3 trillion for the first time, lifting it above Apple Inc.

Nvidia’s stock has been on a seemingly unstoppable rise lately, gaining more than 170% in the year to date. After reporting a blowout first quarter earnings call in May, the stock soared above the $1,000 mark for the first time in the company’s history.

That prompted the chipmaker to announce a 10-for-1 forward stock split that went into effect earlier this month. The stock has continued making gains since then, and with the split, its shares were priced at $135.38 at the market close today.

The rise of Nvidia has coincided with the explosion of interest in generative artificial technology. Nvidia commands an 80% share of the market for AI chips used in data centers, and that industry has mushroomed as hyperscale data center operators such as Microsoft, Google Cloud, Amazon Web Services Inc. and Meta Platforms Inc. race to buy up the powerful graphics processing units they need to power their AI workloads.

All told, Nvidia’s stock has multiplied by more than ninefold since the generative AI era kicked off in late 2022 with the launch of OpenAI’s ChatGPT. The company’s pricey chips are widely seen as essential for developing and training large language models such as ChatGPT, and running AI applications. In its most recent financial report, Nvidia said its data center revenue topped $22.6 billion, up by a stunning 427% from a year earlier, accounting for 86% of its total sales.

Nvidia has become synonymous with the generative AI industry and its stock is seen as a yardstick to gauge the strength of that market. With its massive gains, Nvidia Chief Executive Jensen Huang has seen his net worth explode, and Forbes says his net worth of $117 billion makes him the 11th wealthiest person in the world.

Prior to the rise of generative AI, Nvidia’s GPUs mostly powered expensive graphics cards for use in the gaming industry. Its GPUs are also widely used by cryptocurrency miners.

Microsoft has also benefited from the growth of AI, albeit not to the same extent as Nvidia has. Its stock is up about 20% in the year to date, thanks in part to its decision to become the most important backer of OpenAI. The company has invested billions of dollars into the most prominent AI model maker, and that close association has enabled it to emerge at the forefront of the generative AI revolution.

It has integrated OpenAI’s models into several of its most important products, including its Windows operating system and the Office productivity suite. The company is also one of Nvidia’s biggest customers, snapping up thousands of GPUs for the Azure cloud computing service.

Although Nvidia isn’t the only tech company to benefit from the scramble to integrate AI into every aspect of our lives, very few have come close to demonstrating the same kind of growth, said Holger Mueller, an analyst with Constellation Research Inc. He explained that the chipmaker is uniquely placed to grow well beyond the limits of traditional technology companies, as it faces virtually no competition, and that won’t change for a long time to come.

“Jensen Huang and his team is doing all that they can to further the company’s position, accelerating the innovation cycle of its AI platforms and designs, with plans to ship new ones every year now, instead of every two years like before,” Mueller said. “No one else can do what it does. Compare that to Apple and Microsoft, who both face numerous serious competitors. If Nvidia can pull of its acceleration strategy successfully, it will even harder for the likes of AMD and Intel to catch up.”

Nvidia has never been rated as the world’s most valuable company before. In the last few years, that crown has been exclusively traded between Microsoft and Apple. But neither company has been able to match the rapid rise of the chipmaker. In the case of Apple, its stock is up just 16% in the year to date. It ended the day as the world’s third-richest company, behind Microsoft, after its stock fell 1.1% today, leaving it with a market cap of $3.29 trillion.

Photo: Robert Hof/SiliconANGLE