NEW DELHI: Nvidia Corp., the leading artificial intelligence (AI) chipmaker, has replaced Intel Corp. in the Dow Jones Industrial Average, highlighting a significant shift in the tech industry.
Nvidia's market value soared from approximately $81 billion in 2018 to $3.6 trillion, making it the most-valued company globally, surpassing Apple, Microsoft, and Google. In contrast, Intel's market value fell from $212 billion to $113 billion during the same period.
The surge in Nvidia's revenues, which increased by 265% over the last four years, is attributed to high demand for its graphics processing units (GPUs) for AI applications, particularly large language models. Meanwhile, Intel's revenues declined by 30% as it lost market share to Advanced Micro Devices (AMD) and faced strategic missteps.
The changes in the semiconductor industry also reflect broader trends. Nvidia outsources its manufacturing, benefiting companies like Taiwan Semiconductor Manufacturing Co. (TSMC), whose market cap rose significantly. Conversely, Intel's integrated manufacturing model has struggled.
The COVID-19 pandemic exacerbated semiconductor shortages, leading to a boom in electronics demand. However, as demand softened, the industry shifted from shortage to surplus, resulting in an 8% drop in global semiconductor sales in 2023.
Countries are now investing in domestic semiconductor production capacity, with Europe, South Korea, and the US planning significant increases. The US CHIPS Act aims to revitalize American semiconductor manufacturing, potentially aiding Intel's recovery.
However, the future of AI-driven demand remains uncertain, with concerns about potential shortages of GPUs and AI devices as the market evolves.