Nvidia is expected to overtake Apple as the second most valuable company in the world

Nvidia may soon overtake Apple and become the second most valuable company in the worldbeing the biggest beneficiary of the increase in adoption of AI applications, challenging the iPhone maker, which has been Wall Street’s biggest company by market value for years.

The reliance of virtually all artificial intelligence applications, such as OpenAI’s ChatGPT, on high-tech chips from Nvidia (NVDA.O) has helped the company’s shares nearly triple in value over the past year, reaching $2. 68 trillion.

In contrast, Apple ceded its No. 1 position to Microsoft (MSFT.O) earlier this year as the once-booming company faces weak demand for its iPhones and fierce competition in China. Its most recent value was US$2.92 trillion.

“It’s certainly notable because Apple has been so dominant for so long, especially when it comes to growth and innovation. Recently, however, Apple’s innovation curve appears to have flattened, showing slower future growth,” said Brian Mulberry, client portfolio manager at Zacks Investment Management.

“On the other hand, Nvidia has managed to ride wave after wave of growth. Starting with gaming demand, then crypto, and now AI, they have managed to seamlessly match innovation with demand, resulting in explosive growth.”

The semiconductor company has a significant weight in the S&P 500 (.SPX) and Nasdaq (.IXIC) and has been instrumental in driving U.S. stocks to all-time highs. It has 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 by 2024, surpassing Amazon.com (AMZN.O), Google’s parent company Alphabet (GOOGL.O), and Saudi Aramco (2222.SE).

Since its explosive forecast about a year ago, the company has consistently surpassed Wall Street’s lofty expectations for revenue and profit, with demand for its graphics processors far outstripping supply as Big Tech races to incorporate AI applications.

Sharp increases in analysts’ earnings estimates have resulted in a decline in the stock’s future earnings assessment, even as the share price has risen rapidly. They traded at 37 times forward earnings, compared to 48 times earnings a year ago, LSEG data showed.

Nvidia is also popular in the derivatives market. The GraniteShares 2x Long NVDA Daily ETF (NVDL.O), which tracks twice the daily percentage change of Nvidia, is the largest single stock ETF. The fund reported daily trading volume of $1 billion for the first time ahead of Nvidia’s results last week, and its total net assets hit a record $2.82 billion this week, according to data from Lipper.

Options traders are optimistic as Nvidia volumes, especially for calls, have increased in recent sessions following the rise in the stock price. Thursday marked the fifth consecutive session in which 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.

Via Reuters.