Nvidia Valuation Soars Past Intel on Graphics Chip Boom

Jeran Wittenstein and Ian King (Bloomberg) -- Nvidia Corp.’s market valuation topped Intel Corp.’s for the first time, powered by soaring demand for graphics chips in data centers and other fast-growing technology fields.

Nvidia gained 2.4% on Wednesday, giving it a market value of more than $248 billion. Shares of the graphics chipmaker are up 72% so far this year as investors bet the coronavirus pandemic has accelerated a shift to cloud-based digital services that use its technology. Intel shares have fallen 2% in 2020.

Nvidia was co-founded in 1993 by Jensen Huang, who’s still running the company. At the time, it was one of about two dozen graphics chip companies. It’s now the only independent maker of these components, after all of its rivals have been bought, folded or become part of larger companies.

Nvidia was more successful than its peers at developing chips that turn computer code into the realistic images computer gamers love. Under Huang, the company has pushed that technology into new markets, such as data center servers and artificial intelligence processing.

In just five years, Nvidia’s data center business has grown from $300 million in annual revenue to almost $3 billion. The chipmaker has won orders to equip the giant computing factories owned by companies such as Facebook Inc. and Google by successfully arguing that graphics chips can handle AI workloads better than more standard processors.

Related:MLPerf Is Changing the AI Hardware Performance Conversation. Here’s how

Nvidia is the only company to have made sizable inroads into a server chip market that Intel has mostly dominated. While Intel’s data center business still generates more than $20 billion in annual sales, Nvidia is growing much quicker.

Investors have rewarded this fast expansion with a rich valuation. Since debuting on the Nasdaq in 1999, the stock has averaged an annual return of 33%. In the past five years, it has soared more than eightfold and trades at 75 times earnings, according to data compiled by Bloomberg. Intel shares trade at 12 times earnings.

Nvidia is now the third-largest chipmaker by market capitalization, behind Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.

Intel is responding to Nvidia’s success by introducing similar graphics chips. The two companies are also targeting the market for processors that help run self-driving vehicles.

Intel has weathered similar challenges before. In 2016, Qualcomm Inc.’s market value topped Intel’s as investors bet that smartphones would eclipse traditional computing in popularity. That happened, but Intel benefited indirectly through its server chips powering the cloud services relied on by handsets.

Related:What’s the Best Computing Infrastructure for AI?

Intel also lost the title of the world’s largest chipmaker by revenue to Samsung Electronics Co. in 2017. It regained the title a year later, thanks to its resilient server chip business.