By Medha Singh
(Reuters) – Nvidia could soon overtake Apple to become the world’s second-most valuable company, as the kingmaker behind the AI revolution takes on the iPhone maker that has ruled Wall Street for decades.
The reliance of virtually all artificial intelligence applications such as OpenAI’s ChatGPT on Nvidia’s high-end chips has helped the stock nearly triple its value over the past year to $2.72 trillion.
In contrast, Apple ceded its No. 1 spot to Microsoft earlier this year, as the once-high-flying company grappled with weak demand for its iPhones and tough competition in China. Its last value was $2.93 trillion.
“It’s certainly notable because Apple has been so dominant for so long, especially on the growth and innovation front. However, recently Apple’s innovation curve appears to have flattened, showing a slower future growth,” said Brian Mulberry, client portfolio manager at Zacks Investment. Management.
“On the other hand, Nvidia has been able to capture wave after wave of growth. Starting with gaming demand, then crypto and now AI, they have been able to perfectly match innovation to demand, which equates to explosive growth.”
The semiconductor company is heavily weighted on the S&P 500 and Nasdaq and has played a critical role in pushing U.S. stocks to record highs. That represents more than a third of the S&P 500’s gains this year.
Nvidia also became the fastest company to grow from $1 trillion to $2 trillion in 2024, surpassing Amazon.com, Google parent Alphabet and Saudi Aramco.
Since its boom predictions about a year ago, the company has consistently exceeded Wall Street’s lofty expectations for revenue and profits, with demand for its graphics processors far outpacing supply as big tech are rushing to integrate AI applications.
Large increases in analyst earnings estimates have led to a decline in the stock’s forward earnings valuation, even though the stock price is rising.
It traded at 37 times forward earnings, up from 48 times earnings a year ago, according to LSEG data.
Nvidia is also popular in the derivatives market. The GraniteShares 2x Long NVDA Daily ETF, which tracks Nvidia’s daily percentage change twice, is the largest single-stock ETF.
The fund recorded daily turnover of $1 billion for the first time before Nvidia’s results last week and its total net assets hit a record $2.82 billion this week, data shows by Lipper.
Options traders are optimistic as Nvidia’s volumes, particularly for calls, have increased in recent sessions after its stock price surged.
Thursday marked the fifth straight session in which more than 1 million Nvidia call options changed hands, the longest such streak in the stock’s history, according to a Reuters analysis of Trade data. Alert.
(Reporting by Medha Singh in Bengaluru and Saqib Iqbal Ahmed in New York; Editing by Devika Syamnath)
News Source : finance.yahoo.com
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