NVIDIA surpasses Apple to become the world’s largest company by market capitalization
Nvidia’s stock market value briefly reached $3.53 trillion, while Apple’s stock market value reached $3.52 trillion, according to data from LSEG.
Last June, Nvidia briefly became the world’s most valuable company before being overtaken by Microsoft and Apple. The market capitalizations of the tech trio have been neck-and-neck for months. Microsoft’s market value is $3.2 trillion.
Nvidia’s stock is up about 18% so far in October, a string of gains after OpenAI, the company behind ChatGPT, announced a $6.6 billion funding round. Nvidia provides chips used to train so-called foundational models, such as OpenAI’s GPT-4.
“More companies are now incorporating artificial intelligence into their daily operations, and demand for NVIDIA chips remains strong,” said Russ Mould, investment director at AJ Bell.
“It’s definitely in the sweet spot, and the feeling is that as long as we avoid a major economic downturn in the U.S., companies will continue to invest heavily in AI capabilities, creating a healthy tailwind for Nvidia.” Nvidia’s shares hit a record high Tuesday, rebounding from last week when TSMC, the world’s largest contract chipmaker, posted a better-than-expected 54% quarterly profit increase due to surging demand for chips used in AI. The next big test will be when Nvidia reports its third quarter results in November. Nvidia in August forecast third-quarter revenue of $32.5 billion (+/-2%), compared to the current average analyst expectation of $32.9 billion, according to data compiled by LSEG.
Morgan Stanley analyst Joseph Moore said in an Oct. 10 note that he is “very bullish” on the company over the long term, but that the recent rally has “raised the earnings bar somewhat.”
After meeting with Nvidia CEO Jensen Huang, Moore noted that production ramp-up for the next-generation Blackwell chips looks “very strong” and is booked for 12 months. Shares came under pressure in August after Nvidia confirmed reports that Blackwell chip production would be delayed until the fourth quarter.
Shares of Nvidia, Apple and Microsoft have enormous influence in the overvalued technology sector as well as the broader U.S. stock market, with the three companies accounting for about a fifth of the S&P 500 index’s weight.
Enthusiasm over the prospects of AI, expectations that the U.S. Federal Reserve will lower interest rates significantly, and most recently, a positive start to the earnings season, drove the S&P 500 benchmark to record highs last week.
Nvidia’s massive profits have helped increase the stock’s appeal to options traders, with the company’s options being among the most traded on any given day in recent months, according to data from options analytics provider Trade Alert.
The stock has surged nearly 190% so far this year as the boom in generative AI has led the company to release a series of explosive predictions.
“The question is whether the revenue stream will be sustainable over the long term and whether it will be driven by investor sentiment rather than the ability to prove or disprove the thesis that AI is overkill,” said Rick Meckler, partner at Cherry Lane Investments. Family investment office in New Vernon, NJ.
“I think Nvidia knows that their numbers in the near term are going to be pretty amazing.”
