SAN FRANCISCO: Nvidia Corporation, renowned for its high-performance graphics processing units (GPUs), is on the verge of surpassing Apple Inc. to become the world’s second-most valuable company. This potential leap underscores Nvidia’s dominant role in the burgeoning field of artificial intelligence (AI).
Surge in AI Adoption Fuels Nvidia’s Growth
The widespread reliance on Nvidia’s advanced chips for AI applications, including OpenAI’s ChatGPT, has propelled the company’s stock value to nearly triple over the past year, reaching a market capitalization of $2.68 trillion. In stark contrast, Apple, which has long held the top position, has faced declining iPhone demand and intense competition in China, causing its market value to drop to $2.92 trillion.
Innovation and Market Position
Brian Mulberry, a client portfolio manager at Zacks Investment Management, noted the significance of this shift. “Apple has been dominant for so long, especially on the growth and innovation front. Recently, however, Apple’s innovation curve has flattened, indicating slower future growth,” Mulberry stated. He emphasized Nvidia’s strategic alignment with market demands, transitioning from gaming to cryptocurrency, and now AI, driving substantial growth.
Nvidia’s Market Impact
Nvidia’s performance has been instrumental in propelling U.S. stock indices to record highs. The company’s influence is notable on both the S&P 500 and Nasdaq, contributing to more than a third of the S&P 500’s gains this year. Remarkably, Nvidia became the fastest company to double its market value from $1 trillion to $2 trillion in 2024, outpacing giants like Amazon, Google-parent Alphabet, and Saudi Aramco.
Consistent Outperformance
Nvidia’s consistent ability to exceed Wall Street’s revenue and profit expectations, driven by soaring demand for its GPUs, has cemented its reputation. The company’s shares now trade at 37 times forward earnings, a decrease from 48 times earnings a year ago, despite the sharp increase in share price, according to LSEG data.
Popularity in Derivatives Market
Nvidia’s popularity extends to the derivatives market. The GraniteShares 2x Long NVDA Daily ETF, which tracks twice the daily percentage change in Nvidia, has become the largest single stock ETF. This fund reached a record $2.82 billion in total net assets this week, with $1 billion in daily turnover ahead of Nvidia’s recent results.
Options traders have also shown increased bullishness, with Nvidia call options trading volumes exceeding one million for five consecutive sessions, marking the longest such streak in the stock’s history, based on Reuters’ analysis of Trade Alert data.
Future Outlook
As Nvidia continues to ride the wave of AI innovation, it stands on the brink of a historic achievement, potentially overtaking Apple in market value. This shift underscores the dynamic nature of tech leadership and the ever-evolving demands of the global market.