We've all by now seen how NVIDIA has experienced one of the most dramatic runs in modern market history over the past few years, but why is that the case?
To begin with, its worth stating that NVIDIA didn’t just “get lucky”, it was uniquely positioned when generative AI took off back in 2022–2023. Although its worth noting that their GPUs were already dominant in AI training.
Generative AI Models like ChatGPT require massive compute power which meant companies building AI systems rushed to buy NVIDIA chips. This is ultimately what made the demand so strong for their H100 and A100 AI chips.
More on NVIDIAs timeline, Between 2022 and 2024 their revenue growth skyrocketed. During the rush, NVIDIA effectively became the infrastructure layer of AI. This meant that NVIDIA became the primary chip supplier to companies like Microsoft, Google, Meta and Amazon. Essentially becoming the backbone of AI model training.
What makes NVIDIA especially interesting is the scale at which they crossed the $1 trillion market cap mark, then $2 trillion which led to them competing for the title of most valuable company globally. Very few companies in history have scaled that fast.
Additionally, since NVIDIA dominated the market in a critical industry, some investors saw this as the next long-term infrastructure giant. Other investors worried about the possibility of overvaluation and other competitors emerging into the market.
We are still in the early days of AI, and whether investing in NVIDIA stocks after its explosive rise will prove visionary or premature remains uncertain. What is clear however, is that the NVIDIA phenomenon is one that the market rarely witness. Precisely, a moment in history and time where innovation and speculation move almost in lockstep.
-- FIMJ
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