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Nvidia's market capitalization surpassed $3 trillion on Wednesday after a year of phenomenal growth driven by demand for the company's artificial intelligence chips, overtaking Apple to become the world's second-largest company.
Shares in the U.S. semiconductor design company rose about 5 percent, giving it a market capitalization that surpassed Apple's for the first time, closing at $3.1 trillion on the day, just above Apple's $3 trillion, according to Bloomberg data. The iPhone maker has lost the title of the most valuable publicly traded company this year to Microsoft.
In premarket trading on Thursday, Nvidia shares were up 2%, Apple was down slightly and Microsoft was down 0.3%.
Investors have flocked to Nvidia's shares as tech companies including Google, Microsoft and Meta spend billions of dollars on the company's chips, with no signs of that spending slowing anytime soon.
Nvidia's data center chips power the AI models that CEO Jensen Huang claims will drive a new “industrial revolution” and transform global business with productivity-enhancing capabilities.
The company released another impressive financial report in May, with revenue up 262% year over year, driven mainly by sales of its current-generation “Hopper” chips, and also announced a 10-for-1 stock split that would take effect on June 7.
Nvidia has singlehandedly driven more than a third of the gain in Wall Street's benchmark S&P 500 index this year, according to Bloomberg data, raising concerns among some about an unsustainable bubble. The S&P 500 rose 1.2% on Wednesday and is up 12.3% this year.
Still, Nvidia's strong profits and repeated upward revisions to its earnings estimates mean the company's valuation isn't at its highest levels ever, when measured as a percentage of its past or forecast earnings.
On Wednesday, the company's shares were valued at 42 times expected earnings over the next 12 months, up from 23 times expected earnings at the beginning of the year and well above Apple's 29 times, though still lower than the peak the company hit during the first wave of the AI craze last year.
“Their advantage is they're one of the few companies that can actually demonstrate revenue from AI,” said Stuart Kaiser, head of U.S. equity trading strategy at Citigroup. [the stock] The risks increase as the revenue cycle progresses, but for now it looks pretty clean.”
Despite moves by rivals such as AMD and Intel to grab some of Nvidia's market share, the company remains the undisputed leader in the global technology race to provide cutting-edge hardware to handle increasingly demanding AI workloads and the software tools to build AI applications.
Mr. Huang has pledged to introduce new chips on a “yearly cycle,” unveiling Nvidia's Blackwell products in March. He said the products would generate “significant” revenue this year, sooner than many analysts had expected.
Huang also made a surprise move at the Computex conference in Taiwan over the weekend, revealing the company's next-generation “Rubin” processor, which will start shipping in 2026.
Apple will hold its annual Worldwide Developers Conference on June 10, where CEO Tim Cook is expected to announce the company's own plans to integrate generative AI capabilities into its products.
For now, Apple has been left out of the market frenzy over generative AI that has boosted the stock prices of its rivals, and its iPhone sales are falling year-over-year, in part due to renewed competition in China.
But Cook has said he is “bullish” about the prospects for AI, Apple's shares have recovered from a sell-off since the start of the year, and the company announced a larger-than-expected $110 billion share buyback in May.
