NVIDIA’s Journey to Market Capitalization Leadership: Market Competitiveness and Future Challenges

In 1993, NVIDIA was co-founded by Jensen Huang, Chris Malakowski, and Curtis Prim. The company focused on the development of graphics chip technology in its early days and then released the first generation of GPU architecture in 1999. This not only established NVIDIA as an important node in graphics card technology but also positioned this technology as the key to the subsequent development of artificial intelligence, the metaverse, autonomous driving, and other fields. Therefore, due to the company’s significant investment in R&D costs and long-term time accumulation, its annual R&D costs far exceed those of other technology companies. Despite operational difficulties and technological R&D challenges, NVIDIA persists in this area and has formed a mature chip technology and market share. With the launch of CUDA, NVIDIA not only expands new markets for GPU general-purpose computing to ensure market competitiveness but also promotes the development of deep learning and other compute-intensive applications.

It is no accident that Nvidia hit the top of the US market capitalization list during the boom of artificial intelligence. This is due not only to its forward-looking technical layout but also to its strong technical quality assurance. NVIDIA’s operating income is rising steadily. Among them, the revenue for the fiscal year 2024 reached a record high of $60.9 billion, and in the most recent quarter, its revenue increased by 262% and its profit even increased by 628%. At the same time, the company’s high investment in R&D means that it may have strong development potential, thus boosting the confidence of investors and attracting more capital. Ultimately, whether it is the attraction of long-term investment funds or the group investment effect, it is an important factor in NVIDIA’s high market value.

However, Nvidia’s market value was overtaken by Microsoft, unable to stabilize its position as the highest market capitalization company. Perhaps the most critical factor is the future development of the chip market. Due to the surge in demand, the chip market has experienced strong growth. On the one hand, terminal industries and enterprises are beginning to invest heavily in research and development to reduce chip purchase costs and increase their control over chip technology in the industrial chain. Although there are still significant barriers to this technology, high cost and time are considered advantages of Nvidia’s technology. However, as technology continues to be capitalized and marketized under the influence of the market, Nvidia’s advantage over other companies will gradually weaken, posing a high risk of being replaced. Not only that, but Nvidia is also facing the challenge of whether its largest customer will exhaust the space in their data centers for installing Nvidia’s chips. Therefore, its market demand is passive. Expanding its large user base and reducing dependence on large-demand customers will be an important challenge for Nvidia. The rapid development of the industry has also brought unprecedented competitive pressure on the company. Facing uncertainty in the future, the company’s president, Jensen Huang, has frequently sold Nvidia shares, totaling more than 31.18 million shares. This is also one of the factors that has affected the stability of Nvidia’s stock market.

Therefore, Nvidia’s achievements today, whether its success in reaching the top of the U.S. market capitalization list or the volatility of its market capitalization, are the result of a combination of factors. From groundbreaking accelerated computing technology to forward-looking technology layouts and strong technical quality assurance, these are the keys to NVIDIA’s ability to demonstrate such strong market competitiveness. However, the market is unpredictable, and the competitive pressure brought about by the capitalization and marketization of technology, as well as the passivity of large customer demand, have brought uncertainty to the future of NVIDIA.

But there’s no denying that Nvidia’s success didn’t happen overnight. With continuous innovation and perseverance, it has occupied a place in the chip market. Although the market is unpredictable, Nvidia has always insisted on innovation and development, which is also an important reason why it can gain a foothold in this unpredictable market.

By Han Gao