On Friday, Nvidia made headlines by momentarily eclipsing Apple to become the world’s most valuable company. According to data from LSEG, Nvidia’s stock reached a new milestone with a market value of $3.53 trillion, narrowly surpassing Apple’s valuation of $3.52 trillion. This achievement highlights Nvidia’s soaring demand, mainly driven by its advanced AI chips. Earlier in the year, Nvidia had also briefly claimed the top position before being overtaken by Microsoft and Apple. At present, Microsoft holds a close third position with a valuation of $3.20 trillion, keeping the competition among these tech giants tight.
Nvidia’s stock has enjoyed an impressive 18% gain in October, attributed in part to OpenAI’s recent $6.6 billion funding injection. OpenAI, the company behind the widely recognized AI model GPT-4, relies on Nvidia chips to train its foundational models. “More companies are now embracing artificial intelligence in their everyday tasks, and demand remains strong for Nvidia chips,” remarked Russ Mould, investment director at AJ Bell. He further noted that Nvidia is “certainly in a sweet spot,” and with a stable economic outlook in the United States, there’s optimism that corporations will persist in channeling substantial resources toward AI, providing Nvidia with a favorable boost.
The recent surge in Nvidia’s stock value was propelled further last week after Taiwan Semiconductor Manufacturing Co. (TSMC) reported a strong quarterly profit, largely due to the continued demand for AI chips. As Nvidia prepares to release its third-quarter earnings report in November, investors are eagerly awaiting its performance update. In August, Nvidia projected a third-quarter revenue of $32.5 billion, slightly below analysts’ expectations of $32.90 billion, according to LSEG data.
Joseph Moore, an analyst at Morgan Stanley, is optimistic about Nvidia’s growth potential, although he acknowledged that the recent rally has set higher expectations for the company’s earnings. Following a recent meeting with Nvidia CEO Jensen Huang, Moore observed that Nvidia’s upcoming Blackwell chips have seen robust demand, with orders booked for the coming year. Nvidia faced a brief setback in August when the company confirmed a delay in the production of these next-generation chips, now slated for the fourth quarter.
Together, Nvidia, Apple, and Microsoft make up a substantial portion of the U.S. technology sector, collectively accounting for about 20% of the S&P 500’s total market weight. The booming interest in AI, combined with optimism surrounding U.S. Federal Reserve rate cuts and a promising earnings season, drove the S&P 500 to a record high last week. Nvidia’s stock has been particularly popular with options traders, with its options among the most actively traded, as per data from Trade Alert. The stock has risen by an astounding 190% in 2024, driven largely by the generative AI revolution and strong performance forecasts.
Rick Meckler, a partner at Cherry Lane Investments, commented on Nvidia’s growing appeal, stating, “The question is whether the revenue stream will last for a long time and will be driven by the emotion of investors rather than by any ability to prove or disprove the thesis that AI is overdone…I think Nvidia knows that near term, their numbers are likely to be quite remarkable.” His remarks reflect a sense of cautious optimism, hinting that the fervor surrounding AI may need a solid revenue foundation to sustain investor confidence.
Adding to its growth prospects, Nvidia has embarked on a significant partnership with Reliance Industries to develop a large-scale AI infrastructure in India. The collaboration aims to enhance India’s AI capabilities and was announced at the 2024 Nvidia AI Summit held in Mumbai. The announcement featured Reliance Chairman Mukesh Ambani and Nvidia CEO Jensen Huang during a fireside chat, highlighting the strategic move to bolster AI infrastructure in one of the world’s fastest-growing technology markets.
Nvidia’s rise to the world’s most valuable company underscores the growing influence of AI in the tech industry. With strong demand for its advanced chips, strategic partnerships, and a favorable economic environment, Nvidia is positioned to remain at the forefront of the AI revolution, though it faces the challenge of sustaining investor enthusiasm over the long term.