Nvidia is recovering and ready to dethrone Apple as the most valuable company

(Reuters) – Nvidia shares neared record highs on Monday, putting the heavyweight AI chipmaker on the brink of dethroning Apple as the world's most valuable company.

As investors bet on strong demand for its next-generation Blackwell AI processors, the Santa Clara, California-based company's shares rose 2.8% to $138.57, just below their intraday Record high of $140.76 on June 20th.

In June, Nvidia briefly became the most valuable company in the world. It has been overtaken by Microsoft and the tech trio's market capitalizations have been on par for several months.

The latest gains pushed Nvidia's market value to $3.4 trillion, just below Apple's $3.5 trillion and above Microsoft's $3.1 trillion.

Nvidia was Wall Street's biggest winner in the race between Alphabet, Microsoft, Amazon and other big tech companies for dominance in emerging AI technology.

“We believe that the major AI companies… face an investment environment characterized by a prisoner’s dilemma – each has an individual incentive to continue spending because the costs of not doing so are (potentially) devastating.” , analysts at TD Cowen wrote in a report on Sunday.

TD Cowen reiterated its $165 price target on Nvidia, calling it a “Top Pick.”

As investors prepare for quarterly earnings season, Apple gained 1.2% and Microsoft gained 0.9%, helping the S&P 500 rise 0.7% to its own record high.

Taiwan Semiconductor Manufacturing Co, the contract manufacturer that makes Nvidia's processors, is expected to report a 40% rise in quarterly profit on Thursday thanks to rising demand.

Analysts expect spending to build AI data centers will help Nvidia's annual revenue more than double to nearly $126 billion, according to LSEG data.

While Nvidia's rally has catapulted the S&P 500 to record highs, investors fear optimism about AI could fade if there are signs of a slowdown in spending on the technology.

(Reporting by Noel Randewich; Editing by David Gregorio)