Nvidia (NASDAQ:NVDA) is on the verge of surpassing Apple (NASDAQ:AAPL) to become the world’s second-most valuable company, benefiting significantly from the rapid adoption of artificial intelligence applications. Nvidia’s high-end chips, which power nearly all AI applications like OpenAI’s ChatGPT, have driven the company’s stock value to nearly triple over the past year, reaching $2.68 trillion.
In contrast, Apple, which lost its top spot to Microsoft (NASDAQ:MSFT) earlier this year, is facing weak demand for its iPhones and strong competition in China. Apple’s market value currently stands at $2.92 trillion.
“Apple’s long-standing dominance in growth and innovation appears to be waning, with its innovation curve flattening and showing slower future growth,” noted Brian Mulberry, client portfolio manager at Zacks Investment Management. “Conversely, Nvidia has consistently captured successive growth waves—starting with gaming, then cryptocurrency, and now AI—resulting in explosive growth by aligning innovation with demand.”
Nvidia’s prominence in the S&P 500 and Nasdaq has been instrumental in driving U.S. stocks to record highs, accounting for over a third of the S&P 500’s gains this year. In 2024, Nvidia became the fastest company to grow from $1 trillion to $2 trillion in market value, outpacing Amazon.com (NASDAQ:AMZN), Google-parent Alphabet (NASDAQ:GOOG), and Saudi Aramco.
Since its impressive forecast about a year ago, Nvidia has consistently exceeded Wall Street’s expectations for revenue and profit, with the demand for its graphic processors far surpassing supply as major tech companies rush to incorporate AI applications.
Analysts have sharply increased their earnings estimates for Nvidia, resulting in a decrease in the stock’s forward earnings valuation, despite the rising share price. Nvidia traded at 37 times forward earnings, down from 48 times earnings a year ago, according to LSEG data.
Nvidia is also a favorite in the derivatives market. The GraniteShares 2x Long NVDA Daily ETF, which tracks twice the daily percentage change in Nvidia’s stock, is the largest single stock ETF. The fund saw $1 billion in daily turnover for the first time last week, and its total net assets reached a record $2.82 billion this week, based on Lipper data.
Options traders are optimistic, with Nvidia call option volumes rising significantly after the stock’s surge. Thursday marked the fifth consecutive session with more than a million Nvidia call options traded, the longest streak in the stock’s history, according to a Reuters analysis of Trade Alert data.
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