Nvidia, the biggest beneficiary of the surge in adoption of AI applications, could soon overtake Apple to become the world's second-largest company as it challenges the iPhone maker, which for years has been Wall Street's largest company by market capitalization.
With virtually all artificial intelligence applications, including OpenAI's ChatGPT, relying on Nvidia's high-performance chips, the company's shares have nearly tripled to $2.68 trillion over the past year.
In contrast, once-big-time Apple Inc., last valued at $2.92 trillion, struggled earlier this year with sluggish demand for its iPhone and tough competition in China, losing its top spot to Microsoft Corp.
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“This is certainly noteworthy, as Apple has long been an established leader, particularly in terms of growth and innovation. However, recently, Apple's innovation curve appears to be flattening, signaling slower future growth,” said Brian Mulberry, client portfolio manager at Zacks Investment Management.
“Nvidia, on the other hand, has been able to capture wave after wave of growth. First with gaming, then cryptocurrency, and now AI, it has managed to perfectly align innovation with demand, resulting in explosive growth.”
The semiconductor company is a major weighting in the S&P 500 and Nasdaq and has played a key role in driving U.S. stocks to all-time highs, accounting for more than a third of the S&P 500's gains this year.
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Nvidia also became the fastest company to grow from $1 trillion to $2 trillion in market capitalization through 2024, overtaking Amazon.com Inc., Google-parent Alphabet Inc. and Saudi Aramco.
The company has consistently beaten Wall Street's lofty expectations for revenue and profit since issuing wildly better-than-expected guidance about a year ago, and demand for its graphics processors has far outstripped supply as big tech companies rush to incorporate AI applications.
The company's forward earnings assessment has fallen even as its stock price has soared as analysts' profit forecasts have soared.
Its shares are trading at 37 times forecast earnings, up from 48 times earnings a year ago, according to LSEG data.
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Nvidia is also popular in the derivatives market: The GraniteShares 2x Long NVDA Daily ETF, which tracks twice Nvidia's daily percentage change, is the largest single-stock ETF.
The fund hit $1 billion in daily trading volume for the first time last week ahead of Nvidia's earnings report, and its total net assets hit a record $2.82 billion this week, according to Lipper data.
Nvidia's stock price surge has boosted options traders, with trading volume for the company, particularly call options, increasing in recent sessions.
Thursday marked the fifth consecutive trading day in which more than 1 million Nvidia call options were traded, the longest streak in the stock's history, according to a Reuters analysis of Trade Alert data.
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