Nvidia could soon surpass Apple to become the world's second-most valuable company, as the biggest beneficiary of the surge in adoption of AI applications takes on the iPhone maker that has been the largest Wall Street firm by market value for years.
The reliance of virtually all artificial intelligence
applications such as OpenAI's ChatGPT on Nvidia's high-end chips has helped the
stock nearly triple in value over the past year to $2.68 trillion.
In contrast, Apple ceded its No. 1 spot to Microsoft earlier
this year as the once high-flying company grapples with weak demand for its
iPhones and tough competition in China. It was last valued at $2.92 trillion.
"It is certainly notable because Apple has been so
dominant for so long, especially on the growth and innovation front. Recently
though, Apple's innovation curve seems to have flattened, showing slower future
growth," said Brian Mulberry, client portfolio manager at Zacks Investment
Management.
"On the other hand, Nvidia has been able to catch wave
upon wave of growth. Beginning with gaming demand, then crypto and now AI, they
have been able to perfectly match innovation with demand and that equals
explosive growth."
The semiconductor company is heavily weighted on the S&P
500 and the Nasdaq and has been pivotal in driving U.S. stocks to record highs.
It accounted for more than a third of the S&P 500's gains this year.
Nvidia also became the fastest company to grow from $1
trillion to $2 trillion in 2024, zooming past Amazon.com, Google-parent
Alphabet and Saudi Aramco.
Since its blowout forecast about a year ago, the company has
consistently breezed past Wall Street's lofty expectations for revenue and
profit, with demand for its graphic processors far outstripping supply as Big
Tech rushes to embed AI applications.
Sharp increases in analysts' earnings estimates have
resulted in a fall in the stock's forward earnings valuation, even with the
share price racing higher.
It traded at 37 times forward earnings, compared with 48
times earnings a year ago, LSEG data showed.
Nvidia is also popular in the derivatives market.
GraniteShares 2x Long NVDA Daily ETF, which tracks twice the daily percentage
change in Nvidia, is the largest single stock ETF.
The fund clocked $1 billion in daily turnover for the first
time ahead of Nvidia's results last week and its total net assets have hit a
record $2.82 billion this week, according to Lipper data.
Options traders are bullish as Nvidia's volumes,
particularly for calls, has picked up in recent sessions after the surge in its
stock price.
Thursday marked the fifth straight session where more than a
million Nvidia call options changed hands, the longest such streak in the
stock's history, according to a Reuters analysis of Trade Alert data.