(Photo : nvidia)
nvidia

• Nvidia, the AI chipmaker, is close to surpassing Apple as the world's most valuable company, with a market value of $3.39 trillion.
• The company's rise is driven by the race to dominate emerging AI technology, with major tech companies heavily investing in this area.
• Despite a delay in production of its upcoming Blackwell chips, Nvidia has downplayed the impact, boosting investor confidence.
• However, investors remain cautious due to the volatile nature of the tech industry and potential slowdown in spending on AI technology.

In a significant development in the tech industry, Nvidia, the heavyweight AI chipmaker, is on the brink of dethroning Apple as the world's most valuable company. The company's shares closed at their highest ever on Monday, fueled by strong investor confidence in its current and next-generation AI processors. The Santa Clara, California-based company's stock climbed 2.4% to end the day at $138.07, lifting Nvidia's market value to $3.39 trillion. This places it just below Apple's $3.52 trillion value and above Microsoft's $3.12 trillion.

This is not the first time Nvidia has been in the running for the title of the world's most valuable company. In June, Nvidia briefly held the title before being overtaken by Microsoft. The market capitalizations of these tech giants have been neck-and-neck for several months, reflecting the intense competition in the tech industry.

Nvidia's rise has been driven by the race to dominate emerging AI technology. Major tech companies, including Alphabet, Microsoft, and Amazon, have been investing heavily in this area. According to TD Cowen analysts, these companies face a Prisoner's Dilemma in which they are individually incentivized to continue spending, as the costs of not doing so could be devastating.

Nvidia's Future Prospects and Challenges

Despite a delay in the ramp-up in production of its upcoming Blackwell chips until the fourth quarter, Nvidia has downplayed the impact, stating that customers are snapping up existing chips. This has further boosted investor confidence in the company. TD Cowen reiterated its $165 price target for Nvidia, which it called its Top Pick, and stated that demand for the company's current generation of AI chips remained strong.

As the quarterly reporting season approaches, other tech giants are also seeing gains. Apple rose almost 2%, and Microsoft added 0.7%, helping propel the S&P 500 up 0.8% to its own record high close. Nvidia, Apple, and Microsoft account for about a fifth of the S&P 500's weight, giving them a significant influence on the index's day-to-day gains and losses.

The contract manufacturer that produces Nvidia's processors, Taiwan Semiconductor Manufacturing Co, is expected to report a 40% leap in quarterly profit on Thursday, thanks to soaring demand. Analysts expect spending to build out AI data centers will help Nvidia's annual revenue more than double to nearly $126 billion, according to LSEG data.

Investor Sentiment and Historical Precedents

However, despite Nvidia's rally lifting the S&P 500 to record highs, investors are cautious. There are concerns that optimism about AI could evaporate if signs emerge of a slowdown in spending on the technology. This reflects the volatile nature of the tech industry, where rapid advances can lead to significant shifts in market dynamics.

Historically, the tech industry has seen several instances of companies vying for the title of the world's most valuable company. In the late 1990s and early 2000s, Microsoft and Cisco Systems were in a similar race, driven by the dot-com boom. More recently, Apple, Amazon, and Microsoft have been in contention for the title, reflecting the growing dominance of tech companies in the global economy.