(Reuters) - Chip designer Nvidia closed Tuesday with a trillion-dollar market value for the first time, part of a steady climb in the stock's price in recent months on the back of the artificial intelligence (AI) boom.
Here's an explainer on Nvidia and its role in powering the radical new technology.
HOW BIG IS NVIDIA (NASDAQ:NVDA) IN TERMS OF MARKET VALUE?
Nvidia's $1 trillion valuation makes it the fifth most valuable U.S. company behind Apple (NASDAQ:AAPL), Microsoft, Alphabet (NASDAQ:GOOGL) and Amazon. Two other companies, Tesla (NASDAQ:TSLA) and Meta Platforms, have in the past eclipsed the $1 trillion level, but are currently worth less than that.
FROM GAMING TO AI: NVIDIA'S FOCUS SHIFT
Nvidia, known for its chips used in videogames, pivoted tothe data center market over the last few years.
The company's business rapidly expanded during the pandemicwhen gaming took off, cloud adoption surged and cryptoenthusiasts turned to its chips for mining coins.
The data center chip business accounted for more than 50% of the company's revenue in the financial year ended Jan. 29.
WHY IS GENERATIVE AI A HOT TOPIC?
Viral chatbot ChatGPT has made generative AI abuzzword this year. The technology uses vast troves ofpre-existing data to create new content ranging from poems toimages and even computer code.
Microsoft Corp (NASDAQ:MSFT) and Alphabet Inc-ownedGoogle, two of the biggest players in the space, believe thatgenerative AI can change how work is done. The two have raced toadd the technology to their search engines and productivitysoftware as they seek to dominate the industry.
More recently, chipmaker Advanced Micro Devices (NASDAQ:AMD) released details on its new AI chip to try to challenge Nvidia's market share.
Goldman Sachs (NYSE:GS) analysts estimate that U.S. investment in AIcould approach 1% of the country's economic output by 2030.
WHAT IS NVIDIA'S ROLE IN THE AI BOOM?
The large computers that process data and power generativeAI run on powerful chips called graphics processing units(GPUs).
Nvidia controls about 80% of the GPU market, according to analysts.
GPUs are designed to handle the specific kind of mathinvolved in AI computing very efficiently. By contrast, genericcentral processing units from companies like Intel (NASDAQ:INTC) handle abroader range of computing tasks with less efficiency.
OpenAI's ChatGPT, for example, was created with thousands ofNvidia GPUs. Tesla CEO Elon Musk has also secured GPUs fromNvidia for his AI startup, the Financial Times reported inApril.
WHO ARE NVIDIA'S RIVALS IN THIS MARKET?
Nvidia's main competitors include Advanced Micro Devices andAI chips made in-house by companies such as Amazon.com (NASDAQ:AMZN), Googleand Meta Platforms.