Nvidia, the biggest beneficiary of AI application adoption, may soon surpass Apple as the world’s second-most valuable corporation
All artificial intelligence applications, including OpenAI’s ChatGPT, use Nvidia’s high-end processors. This has contributed to the stock’s nearly threefold increase in value to $2.68 trillion over the past year.
On the contrary, earlier this year, Apple lost its position at No. 1 to Microsoft), as the formerly dominant company struggles with sluggish iPhone demand and intense competition in China. It had a previous valuation of $2.92 trillion.
It is undeniable that Apple’s prolonged dominance, particularly in terms of growth and innovation, is noteworthy. “However, Apple’s innovation curve appears to have plateaued recently, indicating slower future growth,” said Zacks Investment Management client portfolio manager Brian Mulberry.
Conversely, Nvidia has managed to capitalize on successive waves of expansion. Since the demand for gaming, then for cryptocurrencies, and now for artificial intelligence, they have been able to precisely match innovation with demand, which has resulted in explosive growth.
Having propelled U.S. equities to all-time highs, the semiconductor company has a substantial weight on the S&P 500 (.SPX) and the Nasdaq (.IXIC).
This year, it contributed to over one-third of the gains observed in the S&P 500.
Furthermore, surpassing Amazon.com, Alphabet, the parent company of Google, and Saudi Aramco, Nvidia surpassed these companies as the most rapidly expanding firms, from $1 trillion to $2 trillion in 2024.
Since its explosive revenue and profit forecast about a year ago, the company has consistently surpassed Wall Street’s high expectations.
As Big Tech rushes to embed AI applications, demand for its graphic processors significantly exceeds supply.
The stock’s forward earnings valuation has decreased due to substantial increases in analysts’ earnings estimates despite the share price experiencing a rapid ascent.
According to LSEG data, the stock was valued at 37 times forward earnings, up from 48 times a year ago.
Additionally, Nvidia is well-known in the derivatives market. The largest single-stock ETF is GraniteShares 2x Long NVDA Daily ETF, which opens a new tab and monitors twice the daily percentage change in Nvidia.
Daily turnover for the fund surpassed $1 billion for the first time before the release of Nvidia’s results last week, and according to Lipper data, its total net assets have reached a record $2.82 billion this week.
Options traders are optimistic because Nvidia’s recent session volumes have increased, especially for calls, in the wake of the stock price surge.
According to an analysis of Trade Alert data by Reuters, Thursday marked the fifth consecutive session in which more than one million Nvidia call options changed hands. This is the most extended such sequence in the history of the stock.