Nvidia has AI to thank for entering the $1 trillion club

• Nvidia's market capitalization hit $1 trillion Tuesday as its stock surged.
• It's one of a handful of US companies, including Apple, Microsoft, and Amazon, to reach that level.

Nvidia made it into the $1 trillion club on Tuesday after its share price surged.

The chipmaker crossed the threshold before paring some gains to end the day with a market cap of $991 billion, according to data from Refinitiv.

Nvidia is one of the few US companies to reach a trillion-dollar valuation. Apple, Microsoft, Google parent Alphabet, and Amazon are all above that level, while Tesla and Meta have also been in the club too.

Nvidia has artificial intelligence to thank for its rise, as it's a big winner from the ChatGPT mania gripping markets in recent months.

"Surfing the tectonic waves of AI now sweeping the planet, the pioneering chipmaker has positioned itself on course to become one of the world's most valuable companies," said Geir Lode of Federated Hermes.

"Artificial intelligence is the next supercharged growth area, and we expect this is just the beginning."

Powering AI

AI products such as ChatGPT are powered by large computers – and those run on specialized chips called graphics processing units (GPUs).

Nvidia has a 95% share of the GPU market, per data from New Street Research – so the mad scramble for AI by some of the world's biggest tech companies is expected to lead to a huge surge in demand for its flagship product.

OpenAI built its intelligent language bot ChatGPT using thousands of Nvidia GPUs, while Elon Musk has ordered thousands of the processors for his new startup X.AI, Insider previously reported.

Perhaps the strongest sign yet of Nvidia's dominance of AI came when it released second-quarter revenue forecasts that beat Wall Street's expectations by 50% due to soaring demand for its AI chips.

Those results fueled a 24% share-price surge on May 25, adding about $190 billion to its value in a day.

The road to $1 trillion

Nvidia's AI-driven 174% surge has made it the best-performing stock on the S&P 500 index this year.

And since US equity markets bottomed in mid-October, Nvidia's market cap has risen by $710 billion, or 250%.

The ongoing rise of AI means the rally in the chipmaker founded in 1993 by Jensen Huang and two others may not be ending anytime soon.

Nvidia still has a long way to go to beat Apple, however: the iPhone maker is worth almost $2.8 trillion.