By Noel Randewich and Sruthi Shankar
(Reuters) – Nvidia (NASDAQ dethroned Apple (NASDAQ ) as the world's most valuable company on Friday, following a record rally in its shares fueled by insatiable demand for its new artificial intelligence chips for supercomputers.
Nvidia's stock market value briefly reached $3.53 trillion, while Apple's was $3.52 trillion, according to LSEG data.
In June, Nvidia briefly became the most valuable company in the world, before being overtaken by Microsoft (NASDAQ:) and Apple. The tech trio's market capitalizations have been neck and neck for several months. Microsoft's market value stood at $3.20 trillion.
Nvidia shares are up about 18% so far in October, with a series of gains after OpenAI, the company behind ChatGPT, announced a $6.6 billion funding round. Nvidia provides chips that are used to train so-called base models, such as OpenAI's GPT-4.
“More and more companies are adopting artificial intelligence in their daily tasks and demand for Nvidia chips remains strong,” said Russ Mold, chief investment officer at AJ Bell.
“It's certainly in a sweet spot and as long as we avoid a major economic downturn in the United States, there's a sense that companies will continue to invest heavily in ai capabilities, creating a healthy tailwind for Nvidia.”
Nvidia shares hit an all-time high on Tuesday, building on a rally last week when TSMC, the world's largest contract chipmaker, posted a forecast-beating 54% rise in quarterly profit, boosted by growing demand for chips used in ai.
The next big test will be when Nvidia reports third-quarter results in November. In August, Nvidia forecast third-quarter revenue of $32.5 billion, up 2% from analysts' current average expectation of $32.9 billion, according to data compiled by LSEG.
Morgan Stanley analyst Joseph Moore said in a note dated Oct. 10 that he remains “very optimistic” about the company long-term, but that the recent rally “raises the earnings bar a bit.”
After a meeting with Nvidia CEO Jensen Huang, Moore noted that the ramp-up in production of its next-generation Blackwell chips appeared to be “pretty strong” and is booked for 12 months. The stock came under pressure in August after Nvidia confirmed reports that Blackwell chip production was delayed to the fourth quarter.
Shares of Nvidia, Apple and Microsoft have enormous influence on the highly valued technology sector, as well as the broader US stock market, with the trio accounting for about a fifth of the shares' weight.
The frenzy around the prospects of ai, expectations that the US Federal Reserve will sharply cut interest rates and, most recently, an optimistic start to earnings season, have sent the benchmark S&P 500 index lower. an all-time high last week.
Nvidia's huge profits have helped boost the stock's appeal to options traders, and the company's options are among the most traded on any given day in recent months, according to data from options analytics provider Trade Alert. .
Shares are up nearly 190% so far this year, as a boom in generative ai led the company to issue a series of spectacular forecasts.
“The question is whether the revenue stream will last a long time and will be driven by investor emotion rather than any ability to prove or disprove the thesis that ai is hype,” said Rick Meckler, partner at Cherry Lane Investments. a family-owned investment office in New Vernon, New Jersey.
“I think Nvidia knows that in the short term its numbers are probably going to be quite notable.”
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