Nvidia's stock price hit a new all-time high on Monday (October 14) for the first time in four months. This irreplaceable chip manufacturer in the AI era seems to be on track to surpass Apple and become the company with the highest market value in the world again.

Due to investors betting that its current and next-generation AI chips will continue to see strong demand, Nvidia's stock price rose by 2.4% on Monday, closing at $138.07. The latest increase brought Nvidia's market value to $3.39 trillion, slightly lower than Apple's $3.52 trillion, but higher than Microsoft's $3.12 trillion.

In June of this year, Nvidia once surpassed Microsoft and Apple to become the company with the highest market value in the world. Later, although Apple regained the top spot, the market values of these three technology giants have actually been quite close in the past few months. Nvidia, Apple, and Microsoft account for about one-fifth of the S&P 500 index weight, so their performance has a significant impact on the daily fluctuations of the index.

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At present, Nvidia has risen by nearly 14% this month, and it remains the second-best-performing stock in the S&P 500 index for the year.

In the fierce competition among Google, Microsoft, Amazon, and other major technology companies for emerging artificial intelligence technologies, Nvidia, playing the role of the "seller of shovels," has emerged as the biggest winner on Wall Street. TD Cowen analysts wrote in a report on Sunday: "We believe that the main companies in the field of artificial intelligence... are facing an investment environment of a prisoner's dilemma—each company has the motivation to continue spending because the cost of not doing so (may be) catastrophic."

And behind this game, it is obviously beneficial to Nvidia. TD Cowen recently reiterated its target price of $165 for Nvidia, calling it the "top choice" for investment, and said that the market demand for the company's current generation of AI chips remains strong.

The market is still full of confidence in Nvidia.

Nvidia confirmed in August reports that the production ramp-up of its upcoming Blackwell chip would be delayed until the fourth quarter, but downplayed the impact and said that customers are scrambling for existing chips. Earlier this month, Nvidia CEO Jensen Huang stated that Nvidia's Blackwell chip is "fully in production," and market demand is "very crazy."

A report released by Morgan Stanley analysts after meeting with management last week stated that orders for the Blackwell chip "have been booked for about 12 months," and "all signs indicate that the business remains strong, and the outlook is very bright."

These comments have consolidated the view that Nvidia remains the top choice for people to invest in the AI field, especially as major companies continue to commit to their artificial intelligence initiatives. For example, according to the average estimates of analysts compiled by the media, Microsoft is expected to increase capital expenditure by nearly one-third in the fiscal year 2025, reaching about $58 billion.Zehrid Osmani, Portfolio Manager at Martin Currie Investment Management, stated: "There had been concerns about the potential impact of production delays for Blackwell chips, so these new developments are reassuring."

Beyond the optimism surrounding the Blackwell chips themselves, TSMC's recent sales have also demonstrated a strong market demand for AI chips. Additionally, OpenAI's latest round of financing has valued the company at $157 billion. OpenAI has recently released an artificial intelligence model with reasoning capabilities (Google is also researching similar models). These positive developments in the AI and chip sectors have indirectly bolstered confidence in NVIDIA's prospects.

On Monday, other AI chip and hardware stocks on the US stock market, such as ARM, Qualcomm, Broadcom, Advanced Micro Devices (AMD), and Micron, also rose. TSMC's stock price reached a historical closing high along with NVIDIA's on Monday.

John Belton, Portfolio Manager at Gabelli Funds, said that these events have "reignited interest in the AI sector, and people are very excited about the use cases for reasoning-based artificial intelligence. Reasoning represents a new frontier for NVIDIA, and when you consider its computational intensity, it could be a massive new product category."

Belton continues to view NVIDIA as a core holding and believes that AI will bring "steady demand" over a multi-year span. "This is not an undiscovered stock, but if it can achieve the expected numbers, the valuation is still reasonable."

It is worth mentioning that the options market has also recently shown signs of optimism about NVIDIA's prospects. Last Thursday, there was a surge in the purchase of NVIDIA call options, with call option holders able to buy more than 30 million shares of NVIDIA at prices ranging from $150 to $189 by next March. This range is 8.6%-36.9% higher than NVIDIA's closing price on Monday.

According to data compiled by industry media, analysts currently expect NVIDIA's revenue for the current fiscal year to more than double, with another 44% growth expected in the next fiscal year. Over the past quarter, the market has continuously raised expectations for NVIDIA's earnings and profits.

NVIDIA's strong profit growth prospects have made its valuation metrics less daunting, which actually helps bulls continue to buy in. The company's forward price-to-earnings ratio is currently around 37 times, which is indeed a premium compared to the NASDAQ 100 Index, but it is lower than NVIDIA's average over the past five years and also lower than the peak of over 44 times in June.