Nvidia inches close to dethroning Apple as second-most-valuable company

Nvidia shares: The meteoric rise of Nvidia in the stock market is positioning the semiconductor giant to potentially overtake Apple as the world's second-most-valuable company. Investors are flocking to Nvidia, driven by its pivotal role in powering artificial intelligence tools like ChatGPT.

Nvidia's market capitalisation has soared from $1 trillion to over $2 trillion in just nine months, surpassing industry giants such as Amazon.com, Google-parent Alphabet and Saudi Aramco along the way.

Currently valued at around $2.38 trillion, Nvidia trails Apple by $230 billion and Microsoft by approximately $645 billion.

Nvidia's dominance in the high-end AI chip market, controlling 80 per cent of the sector, has been a driving force behind its unprecedented rally. The company's staggering 95 per cent surge in shares this year has propelled Wall Street to record levels, with Nvidia boasting a significant 5 per cent weightage on the benchmark S&P 500 index.

Richard Meckler, a partner at Cherry Lane Investments, attributes Nvidia's rally to its robust business fundamentals and strong speculative support from long option buyers, drawn to its consistent upward trajectory throughout 2024.

Meanwhile, Apple, grappling with slowing iPhone sales, relinquished its title as the most valuable US company to Microsoft in January.

In recent weeks, Nvidia has even eclipsed Tesla as Wall Street's most traded stock by value.

Despite Nvidia's impressive run, its 12-month forward price-to-earnings ratio of 36.6 remains relatively conservative compared to other AI-focused stocks. David Wagner, portfolio manager at Aptus Capital Advisors, believes Nvidia is undervalued relative to the potential growth of the AI industry.

However, there are indications that Nvidia's stock may be nearing a peak. Analysts' median target price over the next 12 months suggests Nvidia would trade at $850 per share, below its current closing price of $926.

(With Reuters inputs)