Chipmaker Nvidia surpassed Microsoft for the first time this month to become the worlds most valuable company, with a market capitalization of $3.3 trillion. Though its reign on the top of the charts was brief, it crowned a rapid climb for the company, which was little known outside tech circles just two years ago.

For most of its three decades of existence, Nvidia was mostly a niche player, making computer chips for video games, but the companys central position in the artificial intelligence boom has led to a spectacular rise.

Nvidia sells the graphics processing units (GPUs) and the software crucial to training and running the AI algorithms that power chatbots and image generators.

Heres how Nvidia became one of the worlds most valuable companies.

Nvidia went public in January 1999 at $12 a share, six years after its founding and a year before the dot-com crash would wipe out much of the stock market value of the burgeoning internet industry. The company was building a reputation for making some of the best chips for video games, and in 2001, it won a contract to supply GPUs for Microsofts Xbox gaming console.

Nvidia had long been traded by professional investment firms, but during the pandemic, millions of people with day jobs got into stock investing through apps such as Robinhood and online forums like Wall Street Bets. Gamers turned retail investors recognized Nvidia as the company that helped power the improvement in video game graphics over the past two decades.

In 2021, Facebook rebranded itself as Meta and brought renewed interest in the concept of the metaverse a future where people spend much of their time plugged into a virtual world. Nvidia chief executive Jensen Huang jumped on the idea and said his companys chips would power the future world of the metaverse. He even used a digital clone of himself speaking at Nvidias annual conference to showcase the tech.

Metas grand plans for the metaverse have yet to pan out, but at the time, some investors were betting it was the next big thing. On Nov. 4, 2021, financial analysts from Wells Fargo published a report detailing how Nvidia was well positioned to benefit from the prophesied metaverse boom, and the stock jumped 12 percent.

At the end of 2022, OpenAI, an artificial intelligence lab founded as a nonprofit in 2015, unveiled ChatGPT. It was more capable than any chatbot that regular people had interacted with yet. The tech industry was enthralled, and within months, Microsoft had invested billions into OpenAI. The AI arms race was on.

Nvidias chips and software are crucial to building the large language models that serve as the underlying technology in ChatGPT and image generators like OpenAIs Dall-E 3, which launched in 2023.

Huang told investors on Feb. 22, 2023, that the company stood to benefit from the AI boom, which was quickly gaining steam. Wall Street was convinced and the stock shot up 14 percent to give the company a total value of $582.3 billion.

Nvidias stock kept climbing. In May 2023, Nvidia reported earnings showing for the first time with real numbers that it was a prime beneficiary of the AI frenzy. The stock jumped 25 percent and the companys valuation briefly crossed $1 trillion, one of only a handful of companies to ever reach that mark.

As the company reported higher revenue numbers, more investors piled in, pushing the stock up until it ended the year worth $1.2 trillion. Because many AI start-ups and companies, including OpenAI, are not public, there were few options for regular people to invest in the AI boom. Many bought Nvidia stock.

In the first quarter of 2024, Nvidias revenue rose to $26 billion from only $7.2 billion in the same period a year before.

AI start-ups, companies trying to add AI to their products and venture capital firms are all trying to get their hands on Nvidias chips, driving up their price. But the biggest buyers are Big Tech companies Microsoft, Amazon, Meta and Google that need the chips to build and train their own AI models.

Earlier this year, Microsoft, Meta and Google told their investors they would increase spending on AI investments. Google alone plans to spend at least $12 billion every four months this year. Much of that money is going straight into Nvidias coffers.

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See how Nvidia became one of the world's most valuable companies - The Washington Post