Chipping away the competition: NVIDIA’s journey to the top
A deep dive at how NVIDIA's chips made it the most dominant force in the tech industry
Over the past 12 months, NVIDIA’s shares have climbed nearly 200%, reaching a market capitalization of $3.035 trillion (Rs. 251.3 lakh crore), adding almost the equivalent of Amazon’s entire market cap, which stands at $1.886 trillion (Rs. 157.4 lakh crore), in less than half a year.
As the world moves towards automation and AI, NVIDIA remains at the forefront, not only shaping the future of technology but also redefining what's possible with each circuit and calculation. In this week’s edition of the Conquest Communiqué, join us as we explore the dynamic journey of NVIDIA to the world’s most valuable company.
The Evolution of GPUs and NVIDIA’s Ascent
NVIDIA has evolved from a provider of niche components for video game enthusiasts to the world’s leading essential tools for various high-performance computing tasks. This evolution has led to NVIDIA's ascent from its GeForce graphic cards to becoming a powerhouse in AI and the industrial metaverse.
Initially, GPUs were designed to handle the complex calculations needed for rendering 3D graphics. However, during the crypto boom, NVIDIA's GPUs were highly sought after for cryptocurrency mining due to their parallel processing capabilities.
However, the real breakthrough came with the pandemic and the advent of AI and the surge in remote work. The subsequent AI boom, led by initiatives from Silicon Valley giants like OpenAI, further solidified NVIDIA's position. Its GPUs became indispensable for training AI models, solidifying the company’s quasi-monopoly status in this domain.
The Multifaceted Future Strategy
Today, the tech market is saturated with AI, and computing power plays a pivotal role in enabling its diverse applications across industries. So what is it that truly separates NVIDIA from its competitors and has allowed for its meteoric rise to become the most valuable company in the world?
It is a fact that NVIDIA offers a comprehensive suite of chips that dominate various sectors, including robotics, healthcare, and autonomous vehicles.
For instance, NVIDIA’s DRIVE AGX is a scalable platform that automakers can use to build autonomous driving solutions, integrating perception, mapping, planning, and control capabilities. This advancement signifies a major step towards making autonomous vehicles a reality, with companies like Tesla and Waymo, even though leading in autonomous driving technology, must continually innovate to keep pace with NVIDIA’s advancements.
NVIDIA’s Isaac platform and the Jetson series, especially the Jetson AGX Xavier, are reshaping industries from manufacturing to logistics, underlining NVIDIA's crucial role in robotics. This places pressure on Microsoft and Amazon, both heavily investing in robotics for warehouses and delivery systems, to either integrate or compete with NVIDIA’s advanced platforms.
Its Clara project accelerates medical imaging, genomics, and drug discovery, enhancing healthcare with precise and efficient AI applications. Apple and Google, focusing on health initiatives and data analytics respectively, view NVIDIA’s advancements as both a challenge and an opportunity to elevate their own AI-driven healthcare solutions.
The company is also reimagining the industrial metaverse with its Omniverse platform, facilitating collaborative 3D design and simulation. This broadens access to robust simulation tools, compelling companies like Microsoft and Apple, focused on similar technologies, to innovate their offerings to compete with NVIDIA’s comprehensive suite.
How has this affected the giants in the market?
In 2024, NVIDIA unveiled the Grace Hopper Superchip at GTC, combining Grace CPU and Hopper GPU architectures to set new benchmarks in high-performance computing and intensifying pressure on tech giants like Apple and Microsoft, prompting them to match NVIDIA’s advancements with their own chipsets (Apple's M-series and Microsoft's Project Brainwave) in high-performance computing and AI.
Simultaneously, NVIDIA introduced DGX Cloud, a cloud-based AI supercomputing service offering on-demand access to robust AI infrastructure. This move significantly impacted cloud service providers such as Amazon AWS, Google Cloud, and Microsoft Azure, compelling them to enhance their offerings to compete with NVIDIA's specialized AI and machine learning capabilities.
The gaming and graphics sectors also saw a seismic shift with the launch of the GeForce RTX 50 series GPUs in 2024. These GPUs brought substantial improvements in ray tracing, AI-based upscaling (DLSS), and overall gaming performance. Companies like AMD, Intel, and Apple, leveraging their graphics capabilities in the M-series chips, faced accelerated development cycles to keep up with NVIDIA’s rapid advancements.
Additionally, NVIDIA's release of the RTX Path Tracing SDK and Neural Graphics Framework in 2024 posed challenges for software giants like Adobe and Autodesk, compelling them to adapt strategies to integrate or compete with NVIDIA’s cutting-edge tools.
In March of 2024, NVIDIA also announced Project GR00T, a general-purpose foundation model for humanoid robots, designed to further its work driving breakthroughs in robotics and embodied AI. As part of the initiative, the company also unveiled a new computer, Jetson Thor a part of its Isaac platform, for humanoid robots based on the NVIDIA Thor system-on-a-chip (SoC), as well as significant upgrades to the NVIDIA Isaac™ robotics platform, including generative AI foundation models and tools for simulation and AI workflow infrastructure.
The first of its kind, this program marks an inflection point in human history, vowing to change the labor industry forever and leaving all other tech giants in the dust
5 Trillion, a distant dream or the future ?
Nvidia currently has a market cap of roughly $3.34 trillion, which means it will require stock price gains of roughly 50% to drive its value to $5 trillion. That seems like small change compared to its 2024 year-to-date gains of 174%, so it's likely just a matter of time.
According to Wall Street's consensus estimates, the company is expected to generate revenue of $120.5 billion in fiscal 2025 (which began in January). That gives the stock a forward price-to-sales (P/S) ratio of roughly 28. If that P/S remains constant, Nvidia will need to generate annual revenue of roughly $180 billion to support a $5 trillion market cap.
Coincidentally, Wall Street is already guiding for revenue growth of 98% in fiscal 2025 (this calendar year) and 33% in fiscal 2026. If the company hits those targets, it could achieve a $5 trillion market cap as early as 2026.
Don't take our word for it, The Rosenblatt Securities analyst Hans Mosesmann just reaffirmed his buy rating on Nvidia stock and assigned a Street-high $200 price target, citing greater demands for AI software and the release of the Blackwell architecture later this year.
The stock is currently selling for 51 times forward earnings, which might seem expensive, but that doesn't take into consideration the stock's 27,570% gains over the past decade. To be clear, there's little chance the next decade will be as lucrative as the past 10 years have been.
That said, given Nvidia's dominant place in the industry and the gale-force secular tailwinds at its back, the chances it will be a market-beating investment in the coming years are exceptional.
What next?
NVIDIA’s sudden rise to the top has left investors with a pivotal decision regarding Nvidia's stock, which has surged over 200% in the past year due to its significant role in AI-chip technology and optimistic financial projections. Projections suggesting potential revenue doubling to $120 billion this fiscal year and further rising to $160 billion the next highlight its rapid growth trajectory, outpacing similar-sized tech firms like Microsoft.
Despite these positive signs, concerns persist over Nvidia's lofty valuation metrics. The stock's forward price-to-earnings ratio surged 80% this year, reflecting investor enthusiasm but also raising vulnerability to sharp corrections in response to adverse developments. Chuck Carlson, CEO of Horizon Investment Services, acknowledges the challenge of navigating investment decisions amid such fervent market sentiment, emphasizing the difficulty of discounting Nvidia's past performance when evaluating its prospects.
Even though NVIDIA stands at the top, the current computing landscape demands vigilance amidst competitive pressure and valuation concerns. As the tech giant continues to shape the future of computing, its strategic decision-making will be paramount in determining its trajectory and long-term success in the dynamic industry.