NVIDIA’s rise in the tech industry has been nothing short of remarkable. The company is on the verge of surpassing Apple to become the second most valuable company in the world, thanks to its dominance in the AI chip market. With a market value of $2.68 trillion, NVIDIA’s stock has nearly tripled in value over the past year, leaving Apple in its wake.
What sets NVIDIA apart is its integral role in the adoption of artificial intelligence applications. Virtually all AI applications, including OpenAI’s ChatGPT, rely on NVIDIA’s high-end chips. This reliance has propelled NVIDIA’s growth, leading to its meteoric rise in the stock market.
“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,” explains Brian Mulberry, client portfolio manager at Zacks Investment Management. “On the other hand, NVIDIA has been able to catch wave upon wave of growth. They have been able to perfectly match innovation with demand, and that equals explosive growth.”
NVIDIA’s success has been a driving force behind the record highs in the U.S. stock market. The company has accounted for over a third of the S&P 500’s gains this year. Additionally, NVIDIA’s market capitalization has soared from $1 trillion to $2 trillion in a remarkably short time, outpacing other giants like Amazon, Google-parent Alphabet, and Saudi Aramco.
The company’s ability to consistently outperform Wall Street’s expectations for revenue and profit has also contributed to its rise. Demand for NVIDIA’s graphic processors has far exceeded supply, as major tech companies rush to incorporate AI applications. This demand has led to sharp increases in analysts' earnings estimates, resulting in a fall in the stock’s forward earnings valuation, even as the share price continues to climb.
NVIDIA’s popularity in the derivatives market is another testament to its success. The GraniteShares 2x Long NVDA Daily ETF, which tracks the daily percentage change in NVIDIA, is the largest single stock ETF. Ahead of NVIDIA’s recent earnings release, the fund saw $1 billion in daily turnover for the first time, and its total net assets have reached a record $2.82 billion. Options traders are also bullish on the company, with volumes for NVIDIA call options increasing in recent sessions.
As NVIDIA overtakes Apple in market value and continues to make waves in the tech industry, it is clear that the company’s focus on innovation and its ability to meet the demands of the AI market have been key drivers of its success. With its high-end chips powering AI applications across industries, NVIDIA is well-positioned to further solidify its position as a leader in the global tech landscape.
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