Nvidia overtakes Microsoft as the world’s second largest company by market capitalization

Key recommendations

• Nvidia’s market capitalization overtook that of Microsoft on Monday, becoming the second largest company in the world after Apple.

• The semiconductor company and its partners see strong demand for products that support artificial intelligence (AI).

• Analysts suggested that Nvidia shares could rise further given the strength of AI spending and seasonal tailwinds.

Nvidia’s ( NVDA ) market capitalization overtook Microsoft’s ( MSFT ) on Monday to become the world’s second-largest company behind Apple ( AAPL ).

Nvidia shares rose just over 2 percent on Monday, lifting the chip maker’s market capitalization to $3.13 trillion, ahead of Microsoft’s $3.04 trillion. Super Micro Computer (SMCI), a partner of Nvidia, reported strong shipments of GPUs driven by artificial intelligence (AI) demand, helping to boost shares of both companies.

In recent months, Nvidia and Microsoft have been jockeying with Apple for the top spot by market cap. In June, Nvidia briefly took the crown when it edged out Microsoft, but Microsoft later claimed the title and Apple has continued ever since.

Strong AI spending could still drive Nvidia stock higher, analysts say

Nvidia’s share price has doubled since the start of the year as demand for its AI chips has surged. Analysts suggested Nvidia shares could climb further given the strength of AI spending trends and seasonal tailwinds.

Semiconductor companies typically perform better in the fourth quarter than in the third quarter, with Nvidia “still poised to lead,” Melius Research analysts said Monday, adding that “the setup here is still pretty good.”

Melius has a $165 price target for Nvidia, a 29% premium to Monday’s closing price of $127.72. That compares with an average price target of $152.52, according to Visible Alpha.

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