Nvidia’s ascent to most valuable company has echoes of dot-com boom

Hewlett Packard Enterprise and Nvidia on 18 June announced Nvidia AI Computing by HPE, an integrated software portfolio for generative AI. (Photo: Bloomberg)
Hewlett Packard Enterprise and Nvidia on 18 June announced Nvidia AI Computing by HPE, an integrated software portfolio for generative AI. (Photo: Bloomberg)


The chip maker passes Microsoft for the top spot, just as John Chambers-led Cisco Systems did two decades ago. He says the situation now is different.

Nvidia has become the U.S.’s most valuable listed company because of the demand for its artificial-intelligence chips, leading a tech boom that brings back memories of one from earlier this century.

Nvidia’s chips have been the workhorses of the AI boom, essential tools in the creation of sophisticated AI systems that have captured the public’s imagination with their ability to produce cogent text, images and audio with minimal prompting.

The last time a big provider of computing infrastructure was the most valuable U.S. company was in March 2000, when networking-equipment company Cisco took that spot at the height of the dot-com boom.

Cisco was riding the wave of a different revolution—the internet—where its products powered that budding industry. Like Nvidia, Cisco also surpassed Microsoft to become the most valuable company.

John Chambers, who was chief executive of Cisco during the dot-com boom, said there are some parallels, but the dynamics of the AI revolution are different from previous ones such as the internet and cloud computing. Chambers, now a venture investor, has made big bets on AI in cybersecurity and other arenas.

“The implications in terms of the size of the market opportunity is that of the internet and cloud computing combined," he said. “The speed of change is different, the size of the market is different, the stage when the most valuable company was reached is different."

Nvidia, a 31-year-old company, became the world’s most valuable firm on Tuesday. The stock closed at $135.58, giving the chip maker a valuation of $3.335 trillion, just above Microsoft at $3.317 trillion.

It marks the first time a company other than Microsoft or Apple has held the title of largest company since February 2019 when Amazon.com briefly topped the list. Nvidia was ranked fifth largest by market valuation a year ago and was ranked 10th largest two years ago. Five years ago, it wasn’t in the top 20 largest companies.

The scramble among tech giants such as Microsoft, Meta and Amazon to lead the way in AI’s development and capture its hoped-for benefits has led to a chip-buying spree that lifted Nvidia’s revenue to unprecedented heights. In its latest quarter, the company brought in $26 billion, more than triple the same period a year before.

Nvidia’s stock was the best performer in the S&P 500 in 2023, and has more than tripled in value over the past 12 months. The company’s value hit $3 trillion this month, less than four months after it reached the $2 trillion mark.

Nvidia split its shares 10-for-1 this month, a move aimed at lowering the price of each share and making it more accessible to investors.

The stunning rise has won plaudits from analysts who agree with Chief Executive Jensen Huang’s assertion that AI is the foundation of a new industrial revolution to which the company is the key supplier. Huang says Nvidia is building “AI factories" that take in data and churn out intelligence.

Nvidia “will be the most important company to our civilization over the next decade as the world becomes more AI-driven," CFRA Research analyst Angelo Zino said recently. The chips Nvidia pioneered will be the most important invention of this century, he said.

The insatiable flow of money into AI has raised eyebrows among investors uncertain the boom can continue without pause. Some $50 billion has been invested in Nvidia’s chips since the boom began, according to a Sequoia Capital estimate in March, but generative-AI startups have only brought in $3 billion in sales.

That imbalance, Sequoia partner Sonya Huang said at the time, meant “we’ve got some real problems to fix."

Capital Economics chief economist Neil Shearing on Monday said the AI bubble would likely help keep U.S. stocks rising for the next year and a half, although it would eventually burst, with the U.S. market “destined for a period of significant underperformance" to follow.

Nvidia and its chief, Huang, are showing few signs of concern, despite an array of challenges around them, from feisty competitors to regulators increasingly scrutinizing the company’s dominance in the AI-chip market, where analysts suggest it has a share of above 80%.

Huang early this month was in Taiwan, where he gave an address and announced new details about a future generation of AI chips set to arrive in 2026.

With the rise of the stock, he has taken on an aura of stardom usually reserved for pop singers and athletes, not 61-year-old tech executives. At the company’s annual conference in March, Huang gave his keynote speech from a stage at an 11,000-capacity arena; in Taiwan, he was pictured autographing the chest area of a woman’s shirt.

Chambers said Huang was working from a different playbook than Cisco but was facing some similar challenges. Nvidia has a dominant market share, much like Cisco did with its products as the internet grew, and is also fending off rising competition. Also like Nvidia, Cisco benefited from investments before the industry became profitable.

“We were absolutely in the right spot at the right time, and we knew it, and we went for it," Chambers said.

Write to Asa Fitch at asa.fitch@wsj.com

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