What exactly does Nvidia do and why are its AI chips so valuable?

It’s dominating the market, selling over 70% of all AI chips, and startups are desperate to spend hundreds of thousands of dollars on Nvidia’s hardware systems. Wall Street can’t get enough, either—Nvidia stock rocketed up an astonishing 15% after the company smashed its lofty earnings goals last quarter, bringing its market cap to over $1.9 trillion on top of its stock value tripling in the last year alone. 

So … why? How is it that a company founded all the way back in 1993 has displaced tech titans Alphabet and Amazon, leapfrogging them to become the third-most valuable company in the world? It all comes down to Nvidia’s leading semiconductor chips for use in artificial intelligence.

The company that ‘got it’

Nvidia built up its advantage by playing the long game and investing in AI since years before ChatGPT hit the market, and its chip designs are so far ahead of the competition that analysts wonder if it’s even possible for anyone else to catch up. Designers such as Arm Holdings and Intel, for instance, haven’t yet integrated hardware with AI-targeted software in the way Nvidia has.

“This is one of the great observations that we made: we realized that deep learning and AI was not [just] a chip problem … Every aspect of computing has fundamentally changed,” said Nvidia co-founder and CEO Jensen Huang at the New York Times’ DealBook summit last November. “We observed and realized that about a decade and a half ago. I think a lot of people are still trying to sort that out.” Jensen said Nvidia just “got it” before anyone…