2024 saw Nvidia (NVDA -0.02%) briefly take the title of the largest company in the world, as measured by market capitalization, before seeding the position back to Apple. Microsoft was also a contender, holding the top spot for some time, as well.
While the other two big tech players have been at the top for many years, Nvidia wasn't even in the top 20 in 2021. This highlights its incredible climb over the course of the last few years.
Market capitalization -- the result of multiplying a company's share price by the number of outstanding shares -- is an imperfect measure of a company's value, but it's a useful guide. It's certainly reflective of a company's dominance in a market, and Nvidia has been dominant in artificial intelligence (AI). Can investors expect this to continue?
Blackwell demand is strong
The rollout of Blackwell, the newest iteration of Nvidia's Superchips, is imminent, and demand is extremely high. The pace of growth of AI training models is staggering and, despite Blackwell chips being more than twice as powerful as their predecessors, CEO Jensen Huang explained that customers are demanding an even greater number of Blackwells for their data centers.
He told analysts that current versions of AI models could use a maximum of 100,000 of the previous Hopper chips, but new models start at 100,000 Blackwell chips. That's driving a demand that he referred to as "insane." It's been reported Nvidia is sold out of Blackwell for at least 12 months, even as it attempts to ramp up production, partnering with Foxconn to build the world's largest Blackwell production facility in Mexico.
Investors will see how this plays out, but things look good for the rollout of the company's most important product. Its successful launch will drive sales, likely leading to another year of growth in the healthy double digits. Morgan Stanley analysts believe there could be a 44% gain in top-line revenue over the next year.
Microsoft made an extremely important announcement
Since the AI boom took off, the lion's share of Nvidia's revenue has flowed in from Silicon Valley companies that build and operate the physical data centers that enable AI -- think Alphabet and Microsoft. The latter announced recently that it expects to spend a staggering $80 billion in AI infrastructure in fiscal year 2025.
That represents a 60% increase from 2024's roughly $50 billion and is significantly more than the $63 billion some analysts expected. Last year's spend was already a record amount and significantly more than the year before. Look at Microsoft's growth in capital expenditures over the last five years -- the majority of this has come from building AI data centers and buying Nvidia chips.
MSFT Capital Expenditures (TTM) data by YCharts.
This trend isn't leveling off but accelerating and is great news for companies like Nvidia that are downstream of this spending. It's also very unlikely that Microsoft will be alone in this. If Microsoft expects to grow its AI spending to this degree, you can be sure that others around Silicon Valley will follow suit.
Nvidia will continue its dominance
All signs at the moment point to Nvidia continuing to dominate an ever-expanding market -- one that PwC, one of the "big four" accounting firms, believes can add $15.7 trillion to the global economy by 2030. Is Nvidia's client base tightening their belts?
Signs of this are not only absent, but also the opposite of what's been happening. The massive expansion of AI data center spending by Microsoft is a critically positive sign for Nvidia and its bottom line, at least for the next year.
I believe that Nvidia's reign will continue through 2025. It's also very possible that it will take the top spot, leapfrogging Apple to once again become the largest company in the world.
