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Nvidia is on the brink of surpassing Apple to become the world’s second-most valuable company, propelled by its dominance in providing high-end chips for artificial intelligence (AI) applications.
The company’s stock has nearly tripled in value over the past year to reach $2.68 trillion, driven by the overall adoption of AI technologies such as OpenAI’s ChatGPT, which heavily relies on Nvidia’s chips.
Apple Decline and Nvidia Growth Trajectory:
Apple, once the top-ranked company in terms of market value, yielded its position to Microsoft earlier this year due to weakening iPhone demand and intense competition in China.
Meanwhile, Nvidia’s ability to capitalize on successive waves of growth, from gaming demand to crypto and AI, has fueled its explosive growth trajectory.
Analysts attribute Nvidia’s success to its innovation and ability to meet burgeoning demand, in contrast to Apple’s perceived stagnation in innovation and slower growth prospects.
Market Influence and Record Growth:
As a key player in the semiconductor industry, Nvidia’s performance heavily impacts the broader market. Its stock accounts for over a third of the S&P 500’s gains this year.
The company’s rapid growth is underscored by its achievement of becoming the fastest company to reach $2 trillion in valuation, outpacing industry giants like Amazon, Google’s parent company Alphabet, and Saudi Aramco.
Financial Performance and Valuation:
Since its robust forecast a year ago, Nvidia has consistently exceeded Wall Street’s revenue and profit expectations, driven by strong demand for its graphic processors amid the proliferation of AI applications.
Despite its soaring stock price, Nvidia’s forward earnings valuation has decreased from 48 times a year ago to 37 times forward earnings, reflecting sharp increases in analysts’ earnings estimates.
Derivatives Market and Investor Sentiment:
Nvidia’s popularity extends to the derivatives market, with the GraniteShares 2x Long NVDA Daily ETF tracking twice the daily percentage change in Nvidia’s stock experiencing significant trading activity.
Options traders are bullish on Nvidia. There has been a surge in trading volumes for call options in recent sessions, marking a record streak of five consecutive sessions with over a million Nvidia call options traded.
