Nvidia Corp, the semiconductor giant known for its AI processors, has surpassed Apple Inc. to become the world's most valuable company, reflecting the meteoric rise of its stock amid escalating demand for artificial intelligence (AI) technologies. Nvidia's market value briefly climbed to $3.53 trillion, edging just ahead of Apple's $3.52 trillion before settling at a matched valuation.

The shift highlights a remarkable year for Nvidia, whose share price has surged nearly 190% as interest in generative AI intensifies. Demand for Nvidia's specialised chips has outpaced that of other key players, driven by an industry-wide push from companies such as Microsoft and Alphabet to dominate AI. This interest recently intensified after OpenAI, the company behind the ChatGPT platform, secured $6.6 billion in new funding, further boosting confidence in the sector.

Apple's struggles with smartphone demand, especially in the competitive Chinese market, have contributed to its decline in valuation. In the third quarter, iPhone sales in China slipped by 0.3%, contrasting with rival Huawei, whose sales surged 42%. Apple is set to release its earnings report next Thursday, with analysts anticipating a modest 5.55% year-on-year revenue increase to $94.5 billion, compared to Nvidia's forecasted 82% revenue growth.

The stock market has witnessed an extraordinary upswing this year, led by tech giants Nvidia, Apple, and Microsoft, who together account for around 20% of the S&P 500 index's total weight. The sector's growth has benefited from a combination of AI optimism, projections of lowered interest rates from the Federal Reserve, and an encouraging earnings season, which has collectively driven the S&P 500 index to record levels.

In June, Nvidia briefly attained the world's most valuable company title before Apple and Microsoft reclaimed the lead. As of this week, Microsoft's valuation stands at $3.2 trillion, trailing Nvidia and Apple but reflecting strong performance due to its involvement in AI advancements. Nvidia's dominance in this arena is further reinforced by its market position as the leading provider of AI-compatible processors, positioning the company as a central player in the race for AI supremacy.

Despite the surge, some investors are questioning whether Nvidia's valuation accurately reflects sustainable long-term demand for AI, a sentiment echoed by Rick Meckler, partner at Cherry Lane Investments, who suggested that future revenues may be more speculative, dependent on market sentiment rather than guaranteed performance. "It's likely that Nvidia's near-term numbers will be impressive, but the real question is if this momentum is driven by investor sentiment or substantive, ongoing demand," Meckler commented.