Nvidia (NASDAQ:NVDA) is on the verge of overtaking Apple to become the world’s second-most valuable company, as the AI powerhouse challenges the long-reigning iPhone maker on Wall Street.
The surge in artificial intelligence applications like OpenAI’s ChatGPT, which heavily rely on Nvidia’s high-end chips, has propelled Nvidia’s stock to nearly triple in value over the past year, reaching $2.72 trillion.
Meanwhile, Apple, which lost its No. 1 spot to Microsoft earlier this year, is facing weak iPhone demand and stiff competition in China. Apple was last valued at $2.93 trillion.
Brian Mulberry, client portfolio manager at Zacks Investment Management, noted, “It is certainly notable because Apple has been so dominant for so long, especially on the growth and innovation front. Recently though, Apple’s innovation curve seems to have flattened, showing slower future growth. On the other hand, Nvidia has been able to catch wave upon wave of growth. Beginning with gaming demand, then crypto and now AI, they have been able to perfectly match innovation with demand and that equals explosive growth.”
Nvidia’s heavy weighting on the S&P 500 and the Nasdaq has been pivotal in driving U.S. stocks to record highs, accounting for more than 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, outpacing Amazon.com, Google-parent Alphabet, and Saudi Aramco.
Since its impressive forecast about a year ago, Nvidia has consistently exceeded Wall Street’s high expectations for revenue and profit, with demand for its graphics processors far outstripping supply as Big Tech integrates AI applications.
Sharp increases in analysts’ earnings estimates have resulted in a lower forward earnings valuation for Nvidia, even with the share price surging. It traded at 37 times forward earnings, compared with 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, is the largest single-stock ETF. The fund saw $1 billion in daily turnover for the first time ahead of Nvidia’s results last week, and its total net assets reached a record $2.82 billion this week, according to Lipper data.
Options traders are bullish on Nvidia, with volumes, particularly for call options, increasing in recent sessions following the surge in its stock price. Thursday marked the fifth consecutive session where more than a million Nvidia call options were traded, the longest such streak in the stock’s history, according to a Reuters analysis of Trade Alert data.
Featured Image – By NVIDIA Taiwan – https://www.flickr.com/photos/nvidia-taiwan/19548286388, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=59135138
