Nvidia, the California-based semiconductor giant, is on the brink of surpassing Apple to become the world’s second-most valuable company, according to latest market closing price. The rally in its stock price, which has lasted for over a year now, is all thanks to the AI boom brought about by the likes of OpenAI, Google and others. Nvidia enjoys a virtual monopoly when it comes to AI chips, that too at a time when demand seems to be far outstripping supply.
Nvidia has played a key role as the provider of high-end chips essential for AI applications like OpenAI’s ChatGPT, which rely heavily on Nvidia’s high-end GPUs for their processing power. For those who need a refresher, unlike CPUs (Central Processing Units) designed for general-purpose tasks, GPUs excel at handling the massive amount of parallel processing required by AI algorithms. This parallel processing allows AI applications to analyze vast datasets and learn from them significantly faster. A lot of cutting-edge AI projects are heavily reliant upon Nvidia’s high-end GPUs, and the company’s shift in focus from gaming to AI has paid off handsomely (the demand for chips often exceeding the supply).
It is thus of no surprise that Nvidia’s stock has nearly tripled in value over the past year, reaching a staggering $2.72 trillion market capitalization (just 11% shy of Microsoft’s market capitalization of $3.2 trillion). So far, the company has already surpassed other tech giants like Amazon, Google-parent Alphabet, and Saudi Aramco in market cap, and analysts believe that Nvidia could soon reach a $3 trillion valuation, driven by its dominance in the semiconductor market.
In fact, the chipmaker holds the distinction of achieving the fastest ascent from a $1 trillion to a $2 trillion market capitalization, surpassing established tech giants like Amazon and Google. The overall market sentiment towards Nvidia is overwhelmingly bullish. This is reflected in the derivatives market, where the GraniteShares 2x Long NVDA Daily ETF, which tracks Nvidia’s daily percentage change with double leverage, has become the largest single-stock ETF. Nvidia’s shares are currently priced at $1,076.06 after clocking a rise over the past five days.
In stark contrast, Apple, which once held the top spot in market valuation, has seen its position challenged. Earlier this year, Apple ceded its No. 1 spot to Microsoft, leaving it with a valuation of $2.93 trillion. Its flagship iPhone product line faces stiff competition in China, and the company’s overall innovation seems to be plateauing. This has opened a window for Nvidia to seize a leadership position in the tech landscape. The fact that Apple has been somewhat late to the AI race, and fallen behind the likes of Microsoft, Google and Amazon, is likely to be another contributing factor.
