Lewis Krauskopf

NEW YORK (Reuters) – Nvidia (NASDAQ:) became the world’s most valuable company after a stunning rise in its shares, underscoring the outsized role investors expect artificial intelligence to play in the global economy in the coming years.

Nvidia shares rose about 3% on Tuesday, giving it a market value of about $3.33 trillion. This pushed the semiconductor industry leader beyond Microsoft (NASDAQ:) and Apple (NASDAQ:), which have been fighting for the top spots in recent days.

Nvidia’s escalate in market value is driven by demand for its chips, which are the gold standard in the AI ​​space. The company’s shares are up more than 170% this year and are up about 1,100% since the October 2022 low.

Impressive earnings and growing investor enthusiasm for artificial intelligence are driving Nvidia’s growth. This fervor was reflected in Nvidia’s market value, which rose from $2 trillion to $3 trillion in just 96 days.

According to Bespoke Investment Group, Microsoft, one of the two remaining companies to reach this infrequent milestone, took 945 days to go from $2 trillion to $3 trillion, while Apple took 1,044 days.

According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, since 1925, only 11 U.S. companies have achieved the highest market value at the end of the day.

The fates of holders of top positions have diverged in recent decades. Microsoft rose to No. 1 in the delayed 1990s, but then in the early 2000s, in the wake of the dot-com bubble, its stock struggled for years before soaring again in the second half of the last decade.

Exxon Mobil (NYSE:) became the world’s most valuable company in the 2000s, but its shares fell as oil prices fell.

For some, Cisco (NASDAQ:) is a cautionary tale. The company’s shares peaked at over $80 in March 2000, in the middle of the Internet boom, during which investors often assigned sky-high valuations to Internet-related companies.

Bespoke analysts recently compared the trajectories of Nvidia and Cisco, whose products were deemed crucial in supporting internet infrastructure.

“NVDA’s strong performance is incredible, but it will need to continue to grow and outperform its competitors if its stock is to continue to generate outstanding returns,” Bespoke said in a recent note.

For now, Nvidia’s profits are supporting its share price. Revenue more than tripled to $26 billion in the latest quarter, while net income increased sevenfold to $14.9 billion.

Revenues for the current fiscal year are expected to approximately double to $120 billion, before rising another 33% in fiscal 2026 to $160 billion, according to LSEG data.

Nvidia’s impressive financial results and forecasts have caused its stock valuation to decline in some respects despite a keen rise in its share price. For example, according to LSEG Datastream, Nvidia’s forward price-to-earnings ratio recently stood at 43. That’s up from the 25 level it was at at the beginning of the year, but below levels achieved for much of last year. However, trades at 21 times earnings.

While Nvidia achieved an exceptional result, it is not the only company to benefit from enthusiasm about the profit potential for artificial intelligence. Shares of other technology companies, including Super Micro Computer (NASDAQ:) and Arm Holding stocks (NASDAQ:) have also surged this year.