Nvidia has overtaken Apple to become the second most valuable company in the world following a year of growth fuelled by demand for AI microchips.
The AI chip maker’s market value rose past $3 trillion on Wednesday, ending at 3.01 trillion according to Bloomberg data, slightly ahead of Apple’s $3 trillion.
This makes Nvidia the second most valuable listed company behind Microsoft this year, whose value has also been surging thanks to its continued investment in ChatGPT-creator OpenAI.
Valued at "just" $2tn as recently as February, Nvidia’s stock has soared over the past 12 months as Silicon Valley tech giants including Google, Microsoft and Meta spend billions of dollars on its chips, and there’s no indication that this spending spree will slow anytime soon.
The company delivered another incredibly strong earnings report in May, with revenues up 262 per cent year on year, thanks largely to sales of its current generation “Hopper” chips.
Nvidia’s data centre chips power some of the leading AI models on the market, including OpenAI’s ChatGPT, Google’s Gemini, and a range of other technologies that rely on large language models (LLMs) to function.
The company has single-handedly driven more than a third of the gains on Wall Street’s benchmark S&P 500 index this year, according to Bloomberg data.
It sparked a new wave of share purchases after it announced plans last month for a so-called 10-for-one stock split, which goes into effect on June 7.
The move is expected to increase the number of shares by a factor of 10 and reduce their value accordingly, a change aimed at making shares more affordable to small-time investors.
It is expected to create even more demand for the stock and catapult Nvidia’s valuation even further.
The AI stock boom
Optimism about AI is one of the forces behind a broader market rally over the last year, which pushed the S&P 500 and the Nasdaq in the United States to new records on Wednesday.
Apple had appeared to be losing out earlier this year as sales growth stalled. But in recent weeks, its shares have also sored as it anticipates how it plans to incorporate AI into its own strategy.
Shares in the firm rose 0.7%, giving it a market capitalisation of roughly $3tn, calculated by multiplying the number of shares in a company by its current share price.
But Nvidia’s market value rose even faster than this, rising by a whopping 5% on Wednesday alone to make it valued at 42 times its expected earnings over the next 12 months.
That’s up 23 times forward earnings at the start of the year and well above Apple’s 29 times – although that is below the peak it hit during the height of the AI boom last year.
Silicon Supremacy
Despite moves by rivals such as AMD and Intel to capture some of Nvidia’s market share in the AI space, it remains the undisputed leader in the AI arms race.
This is largely thanks to its advanced hardware for increasingly demanding AI workloads and software tools to build AI applications.
Silicon Valley.
Apple, on the other hand, has so far been left out of the market hype around generative AI that has boosted shares of its rivals. Sales of its iPhones are also down year on year, partly due to resurgent competition in China.
The tech giant is holding its annual Worldwide Developers Conference on June 10, where chief executive Tim Cook is expected to set out the company’s plans for integrating AI features into its own products.
