Nvidia last week became the first publicly traded company in history to top a market capitalisation of $4-trillion — that’s an unfathomable R72-trillion.
Apple and Microsoft have at times in the past year looked as if they’d reach the $4-trillion milestone before Nvidia. But in this era of AI, Nvidia is the company reaping the biggest financial rewards — for now.
It provides the “picks and shovels” of this generation’s tech gold rush: the advanced silicon, built on the discrete graphics processors for PC video games it pioneered in the 1990s. Today that silicon powers the sprawling, power-hungry data centres at the heart of the AI revolution. When you engage with ChatGPT, you’re more likely than not using an Nvidia AI accelerator.
Though the numbers are not comparable, it’s incredible to think that Nvidia’s market valuation is now 10 times South Africa’s 2024 GDP. Ten times!
The company now commands a valuation nearly 40 times that of Intel, the company whose silicon led the era of personal computing that began in the 1970s. That era put computers in homes and offices around the world and minted the IT industry’s first billionaires, from Intel’s Gordon Moore to Microsoft’s Bill Gates.
But Intel has fallen on hard times: not only did it miss the smartphone wave, allowing rival Qualcomm to corner the market for the chips sold in billions of Android phones, but it also missed the next big wave, which Nvidia co-founder and CEO Jensen Huang is riding to fabulous wealth — a personal fortune of $144bn and counting.
So-called hyperscalers — companies such as Microsoft, OpenAI and Google — can’t get enough of Taiwan-born Huang’s pricey graphics processing units (GPUs) to power their shiny new AI data centres, betting that these vast facilities will form the basis of a new era of rapid productivity gains led by automation and robotics. The disruption ahead promises to be on a scale not seen since the second industrial revolution — or so the tech industry claims. Yet it also feels a little like the dot-com bubble of 25 years ago.
One of the poster children of market excess back then was Cisco Systems, a networking vendor that briefly became the most valuable company in the US before the market crashed in March 2000. Is Nvidia headed the same way?
Maybe.
It’s incredible to think that Nvidia’s market valuation is now 10 times South Africa’s 2024 GDP
Nvidia is not universally admired. Indeed, the market on which it built its business is turning on it. The PC gaming community is outraged at the company’s business practices and wants nothing more to do with it. Watch the top gaming hardware YouTubers or read the gaming press. The anger towards the company is palpable and growing.
Why? They’re angry at how expensive Nvidia GPUs have become — its top-end cards now cost more than $2,500 in retail. They accuse the company of trying to manipulate the tech press with absurd rules about how its products can be reviewed. They say the company has abandoned the very consumers whose loyalty helped it become the AI behemoth it is today.
In short, they’re super pissed off, they’re accusing Nvidia of ruining PC gaming and they’re actively seeking alternatives. And they’re finding one in chip maker Advanced Micro Devices (AMD). A company that for decades struggled to compete meaningfully with Intel and Nvidia, AMD has reinvented itself in recent years under the leadership of CEO Lisa Su who, like Huang, is a Taiwan-born US chip mogul (they’re even first cousins, once removed).
AMD is delivering GPUs that are relatively affordable (compared with Nvidia’s chips) and has begun capturing the imagination of gamers. The company is also making great CPUs (the beating heart of PCs) that stand up well next to the best Intel has to offer. Many tech enthusiasts I know are switching wholesale to AMD.
And AMD is now emerging as a credible challenger to Nvidia in AI accelerators too, though it still has a long way to go to catch up in a market owned 80%-90% by Nvidia, according to analyst estimates. Nvidia’s lead is based on its Cuda software, which makes it easy for developers to build, train and deploy AI models on its hardware, still seen as the best for AI workloads, despite its high cost.
But the tech industry moves quickly. AMD is attacking Nvidia with cheaper GPUs and it’s gaining ground, not only in gaming but in AI data centres too.
Many gamers will tell you Nvidia risks losing the desktop GPU market to AMD because of its high pricing and apparent arrogance. It’s now riding high in the booming market for AI accelerators, but could its hubris and willingness to use its pricing power be its undoing there, too? There’s $4-trillion riding on the answer.
McLeod is editor of TechCentral
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