Nvidia Surpasses Microsoft to Become the World's Most Valuable Company.

Nvidia (NVDA.O) achieved a historic milestone on Tuesday by becoming the world's most valuable company, surpassing tech giant Microsoft (MSFT.O). This leap underscores Nvidia's pivotal role in the fast-evolving field of artificial intelligence, driven by its cutting-edge processors. The chipmaker's stock rose by 3.5% to $135.58, pushing its market capitalization to a staggering $3.335 trillion. This ascent comes shortly after Nvidia surpassed Apple (AAPL.O), positioning itself as the second most valuable company globally.

Microsoft's market valuation stood at $3.317 trillion despite a 0.45% decline in its share price. Meanwhile, Apple's shares fell by over 1%, reducing its market value to $3.286 trillion.

Nvidia's remarkable surge in market value over the past year highlights the Wall Street enthusiasm fueled by emerging AI technology. This rally has propelled the S&P 500 and Nasdaq to record highs. However, there are growing concerns among investors that this optimism could wane if spending on AI begins to show signs of slowing down.

"It's Nvidia's world; we're merely participants," remarked Steve Sosnick, chief market strategist at Interactive Brokers.Nvidia has surged to become the most actively traded company on Wall Street. Recent data from LSEG reveals that its daily trading volume averages $50 billion. This figure significantly outpaces other giants like Apple, Microsoft, and Tesla, each of which sees around $10 billion in daily trades. Remarkably, Nvidia's trading now represents approximately 16% of all transactions among S&P 500 companies.

Nvidia’s stock has nearly tripled this year, a remarkable surge compared to Microsoft’s 19% increase. This explosive growth is driven by an insatiable demand for Nvidia’s advanced processors, which consistently outstrip supply.

Tech titans like Microsoft, Meta Platforms, and Alphabet (Google’s parent company) are fiercely competing to enhance their AI capabilities and integrate this transformative technology into their offerings. Amid this AI arms race, Nvidia’s processors are widely regarded as superior to those of its competitors, positioning the company as the prime beneficiary of the AI boom.

Oliver Pursche, senior vice president at Wealthspire Advisors in New York, cautions that while Nvidia’s strong performance and strategic moves have garnered widespread acclaim, any minor misstep could trigger a significant stock correction. Investors are advised to proceed with caution.

On Tuesday, Nvidia’s stock soared to a new record high, adding over $110 billion to its market capitalization—equivalent to the entire value of Lockheed Martin. Remarkably, Nvidia’s market value has doubled from $1 trillion to $2 trillion in just nine months as of February and surged to $3 trillion in just over three months by June.

Since a stellar earnings forecast about a year ago, Nvidia has consistently exceeded Wall Street’s high expectations for both revenue and profit. The relentless demand for its graphics processors, as companies clamor to integrate AI into their systems, continues to outpace supply. In May, Nvidia executives projected that the demand for their Blackwell AI chips could surpass supply well into the following year.

Despite the meteoric rise in its stock price, Nvidia’s valuation in terms of earnings has moderated. The stock recently traded at 44 times its expected earnings, down from over 84 times a year ago, according to LSEG data. This decline in earnings valuation, coupled with a 10-for-one stock split last week, has increased the appeal of Nvidia’s stock among individual investors.