Nvidia has overtaken Apple to become the world’s most valuable company

Nvidia overtook Apple as the world’s most valuable company on Friday following a record-setting rally in the stock, driven by insatiable demand for its new supercomputing AI chips.

Nvidia’s stock market value briefly touched $3.53 trillion, while Apple’s was valued at $3.52 trillion, according to data from LSEG.

In June, Nvidia briefly became the world’s most valuable company, before being overtaken by Microsoft and Apple. The market capitalization of the tech trio has been on a tear for several months. Microsoft had a market value of $3.20 trillion.

Nvidia stock is up nearly 18% so far in October after OpenAI, the company behind ChatGPT, announced a $6.6 billion funding round. Nvidia provides the chips used to train so-called foundation models, such as OpenAI’s GPT-4.

“More companies are now adopting artificial intelligence in their daily operations and demand for Nvidia chips is strong,” said Russ Mold, investment director at AJ Bell.

“It’s certainly in a sweet spot and as long as we avoid a major economic recession in the United States, there is a feeling that companies will continue to invest heavily in AI capabilities, creating a healthy tailwind for Nvidia.”

Shares of Nvidia hit a record high on Tuesday, building on last week’s rally when TSMC, the world’s largest contract chipmaker, reported a 54% jump in quarterly profit due to increased demand for chips used in AI.

The next big test will be when Nvidia reports third-quarter results in November. According to data compiled by LSEG, Nvidia in August forecast third-quarter revenue of $32.5 billion, plus or minus 2%, compared with the current average analyst expectation of $32.90 billion.

Morgan Stanley analyst Joseph Moore said in an Oct. 10 note that he remains “very bullish” on the company over the long term, but that the recent rally has “put some upside to earnings.”

After a meeting with Nvidia CEO Jensen Huang, Moore noted that production of its next-generation Blackwell chips appeared to be “very strong” and was booked for 12 months. The stock came under pressure in August after Nvidia confirmed reports that production of Blackwell chips had been delayed until the fourth quarter.

Shares of Nvidia, Apple and Microsoft dominate the richly valued technology sector as well as the broader US stock market, with the three accounting for about a fifth of the S&P 500 index’s weighting.

The prospects of AI, expectations that the US Federal Reserve will cut interest rates significantly and, more recently, an upbeat start to the earnings season pushed the benchmark S&P 500 to an all-time high last week.

Nvidia’s big gains have helped boost the stock’s appeal for options traders, and the company’s options are the most traded on any given day in recent months, according to data from options analytics provider Trade Alerts.

The stock is up nearly 190% so far this year as the boom in generative AI has prompted the company to issue a series of blowout forecasts.

“The question is whether the revenue stream will last long and will be driven by investor sentiment rather than the ability to prove or disprove the thesis that AI is overdone,” said Rick Meckler, partner at Cherry Lane Investments. Family Investment Office in New Vernon, New Jersey.

“I think Nvidia knows that in the near term, their numbers could be quite significant.”