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Technology multinational Nvidia has become the world's most valuable company, dethroning tech heavyweight Microsoft as its high-end processors play a central role in a scramble to dominate artificial intelligence computing.
Shares climbed 3.5 per cent to $US135.58 ($203.60) in the US on Tuesday, local time, lifting its market capitalisation to $US3.335 trillion just days after overtaking Apple to become the second most valuable company.
Microsoft and Apple trailed behind with a stock market value of $US3.317 trillion and $US3.286 trillion respectively, with both seeing their shares dip.
Nvidia's stunning surge over the past year has become emblematic of a Wall Street frenzy driven by optimism about emerging AI technology.
"It's Nvidia's market; we're all just trading in it," Steve Sosnick, chief market strategist at Interactive Brokers, said.
Meteoric Wall Street rise
Tuesday's gain lifted Nvidia's stock to a record high — nearly tripling this year — and added more than $US110 billion to its market capitalisation, equivalent to the entire value of Lockheed Martin.
The company's market value expanded from $US1 trillion to $US2 trillion in just nine months in February, while taking just over three months to hit $US3 trillion in June.
In comparison, Microsoft's shares rose about 19 per cent.
Nvidia has also become by far the most traded company on Wall Street, with daily turnover recently averaging $US50 billion, compared to about $US10 billion each for Apple, Microsoft and Tesla, according to LSEG data.
The chipmaker now accounts for about 16 per cent of all trading in S&P 500 companies.
Since its blowout forecast about a year ago, it has consistently breezed past Wall Street's lofty expectations for revenue and profit, with demand for its graphics processors far outstripping supply as companies rush to embed AI applications.
Nvidia executives said in May demand for its Blackwell AI chips could exceed supply "well into next year".
Sharp increases in analysts' expectations for Nvidia's future earnings have outpaced its stellar stock gains, resulting in a fall in the stock's earnings valuation.
Investors warned to be on lookout for market correction
Nvidia recently traded at 44 times expected earnings, down from over 84 about a year ago, LSEG data showed.
Increasing the appeal for its highly valued stock among individual investors, Nvidia last week split its stock 10 for one.
But while Nvidia's rally has lifted the S&P 500 and Nasdaq to record highs, some investors worry unbridled optimism about AI could evaporate if signs emerge of a slowdown in spending on the technology.
Yet competition remains high, with tech giants including Meta and Google pushing hard for the integration of AI in their digital offerings.
An insatiable appetite for Nvidia's AI processors, viewed as far superior to competitors' offerings, has left them in tight supply, and many investors view the company as the greatest winner to date from surging AI development.
"Nvidia has been getting a lot of positive attention and has been doing a lot of things very correctly, but a small misstep is likely to cause a major correction in the stock, and investors should be careful," Oliver Pursche, senior vice-president at Wealthspire Advisors in New York, said.
Reuters