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• Nvidia briefly surpassed Apple to become the world's most valuable company, driven by demand for its AI chips.
• Nvidia's dominance in the AI computing market has led to its rise, competing with tech giants like Microsoft, Alphabet, and Meta Platforms.
• Despite Apple's struggles with tepid smartphone demand, analysts predict a 5.55% revenue climb, while Nvidia is projected to see nearly 82% revenue growth.
• The shift in market leadership from Apple to Nvidia highlights the growing importance of AI technology and the dynamic nature of the tech market.

In a historic turn of events, Nvidia (NVDA.O), the Silicon Valley chipmaker, has momentarily surpassed Apple (AAPL.O) to become the world's most valuable company. This shift in market leadership was driven by a record-setting rally in Nvidia's stock, fueled by an insatiable demand for its specialized artificial intelligence (AI) chips. On the day of this significant event, Nvidia's stock market value briefly touched $3.53 trillion, slightly edging out Apple's $3.52 trillion, according to LSEG data. By the end of the day, Nvidia's market value stood at $3.47 trillion, up 0.8%, while Apple's shares rose 0.4%, valuing the iPhone maker at $3.52 trillion.

This is not the first time Nvidia has claimed the top spot. In June, Nvidia briefly held the title of the world's most valuable company before being overtaken by Microsoft (MSFT.O) and Apple. The market capitalizations of these tech giants have been neck-and-neck for several months, reflecting the intense competition in the technology sector.

Nvidia's rise to the top can be attributed to its dominance in the AI computing market. The company, known since the 1990s for designing processors for video games, has emerged as the biggest winner in the race to dominate the emerging technology. This race includes heavyweights like Microsoft, Alphabet (GOOGL.O), and Meta Platforms (META.O).

Nvidia's Stock Performance and Future Prospects

The company's stock has seen a significant surge in October, rising about 18%. This string of gains came after OpenAI, the company behind ChatGPT, announced a funding round of $6.6 billion. This announcement further boosted Nvidia's standing in the market, highlighting the growing importance of AI technology in various sectors.

Nvidia's stock also got a lift after data storage maker Western Digital (WDC.O) reported a quarterly profit that beat analysts' estimates, buoying optimism about data center demand. This positive news underscores the interconnectedness of the tech sector and how developments in one area can impact others.

More companies are now embracing artificial intelligence in their everyday tasks and demand remains strong for Nvidia chips, said Russ Mould, investment director at AJ Bell. He added that as long as the United States avoids a significant economic downturn, companies will continue to invest heavily in AI capabilities, creating a healthy tailwind for Nvidia.

Apple's Struggles and the Broader Market Impact

Meanwhile, Apple is grappling with tepid demand for its smartphones. iPhone sales in China slipped 0.3% in the third quarter, while sales of phones made by rival Huawei surged 42%. Despite this, analysts on average see Apple's revenue climbing 5.55% year over year to $94.5 billion, according to LSEG data.

This compares with analysts' projections for Nvidia of nearly 82% revenue growth to $32.9 billion. These projections highlight the differing trajectories of these two tech giants, with Nvidia's growth fueled by the booming AI market and Apple's growth more modest due to slowing smartphone sales.

Shares of Nvidia, Apple, and Microsoft have an outsized influence on the richly valued technology sector as well as the broader U.S. stock market, with the trio accounting for about a fifth of the S&P 500 index's (.SPX) weight. Optimism about the prospects for AI, expectations that the Federal Reserve will considerably bring down U.S. interest rates, and most recently, an upbeat start to the earnings season, helped lift the benchmark S&P 500 to an all-time high last week.