Nvidia becomes world's most valuable company

FILE PHOTO: A NVIDIA logo is shown at SIGGRAPH 2017 in Los Angeles, California, U.S. July 31, 2017. REUTERS/Mike Blake/File Photo

(Reuters) - Nvidia became the world's most valuable company on Tuesday, dethroning tech heavyweight Microsoft, as its chips continue to play a central role in a race to dominate the market for artificial intelligence.

Shares of the chipmaker climbed 3.2% to $135.21, lifting its market capitalization to $3.326 trillion, just days after overtaking iPhone maker Apple AAPL.O to become the second most valuable company. The stock has surged about 173% so far this year, compared with a rise of about 19% in Microsoft shares.

COMMENTS:

WASIF LATIF, PRESIDENT AND CHIEF INVESTMENT OFFICER, SARMAYA PARTNERS, PRINCETON, NEW JERSEY

"There's been a lot of strong not only hedge fund buying but also broader retail buying in Nvidia. That's likely to continue given the tools that are out there in very specific thematic funds and leveraged funds. This run might continue until we do see a slowdown in the pace of its earnings growth. The stock move is pretty well correlated to the growth of its earnings and history shows us that the high growth stocks tend to do really well as long as that earnings growth trajectory is in intact. The math tells us that the growth is not possible on a perpetual basis. At some point, you'd see the growth rate slow down and at that point you might see the market reflecting some of the slowdown in the earnings growth. Otherwise, it's growing at a point and the market is factoring in that the stock would become the largest entity on the planet."