Nvidia Surpasses Apple as World's Most Valuable Company

By Sruthi Shankar and Noel Randewich

(Reuters) – Nvidia (NASDAQ:NVDA) dethroned Apple (NASDAQ:AAPL) as the world's most valuable company on Friday after a record-setting rally in its stock, driven by soaring demand for its specialized artificial intelligence chips.

Nvidia's stock market value briefly reached $3.53 trillion, just above Apple's $3.52 trillion, according to LSEG data. Currently, Nvidia's market value is $3.52 trillion, up 2.2%, while Apple's shares increased 0.9%, bringing its value to $3.54 trillion.

Previously, in June, Nvidia had also briefly held the title of the world's most valuable company before being surpassed by Microsoft (NASDAQ:MSFT) and Apple. For several months, these tech giants have had closely competing market capitalizations.

Microsoft's current market value is $3.20 trillion with its stock up 1.3%.

Nvidia, a leading supplier of processors for AI computing, has emerged as the top beneficiary in the race among tech giants like Microsoft, Alphabet (NASDAQ:GOOGL), and Meta Platforms (NASDAQ:META) to dominate AI technology.

Once primarily known for designing video game processors since the 1990s, Nvidia's stock has surged approximately 18% this October, buoyed by the announcement of a $6.6 billion funding round from OpenAI, the company behind ChatGPT.

Nvidia and other semiconductor stocks received a boost on Friday following Western Digital (NASDAQ:WDC)'s quarterly profit surpassing analysts' expectations, enhancing optimism about data center demand.

Investment director at AJ Bell, Russ Mould, noted, "More companies are now embracing artificial intelligence in their everyday tasks, and demand remains strong for Nvidia chips. It is certainly in a sweet spot so long as we avoid a significant economic downturn in the U.S., there’s a sense that companies will continue heavily investing in AI capabilities, creating a favorable environment for Nvidia."

Nvidia's shares have reached a record high, bolstered by a previous rally following TSMC, the world's largest contract chipmaker, reporting a 54% jump in quarterly profit driven by rising AI chip demand.

In contrast, Apple is facing challenges with waning demand for its smartphones. iPhone sales in China dipped 0.3% in Q3, while rival Huawei saw a 42% increase in sales. Apple is set to report its quarterly results this Thursday, with analysts projecting a 5.55% revenue increase year-over-year to $94.5 billion, compared to Nvidia's projected 82% revenue growth to $32.9 billion.

The shares of Nvidia, Apple, and Microsoft significantly influence the tech sector and the broader U.S. stock market, representing about 20% of the S&P 500 index.

Recent optimism about AI prospects, expectations for substantial reductions in U.S. interest rates by the Federal Reserve, and a positive start to the earnings season have buoyed the S&P 500 to a record high last week.

Nvidia's impressive performance has drawn the attention of option traders, with its options being among the most actively traded recently, as per data from options analytics provider Trade Alert.

The stock has surged nearly 190% this year, fueled by a boom in generative AI and a series of optimistic forecasts from Nvidia.

Rick Meckler, a partner at Cherry Lane Investments, expressed concern regarding the sustainability of revenue streams, stating, "The question is whether the revenue stream will last for a long time and will be driven by investor emotions rather than any genuine ability to validate the AI predictions. Nvidia is likely to see remarkable numbers in the near term."