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

With investors betting on strong demand for its next-generation Blackwell AI processors, the Santa Clara, California company's stock climbed 2.8% to $138.57, just short of its intraday record high of $140.76 on June 20.

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

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

Nvidia has been Wall Street's biggest winner from a race between Alphabet, Microsoft, Amazon and other major tech companies to dominate emerging AI technology.

"We believe the major companies in AI ... face an investment environment characterized by a Prisoner's Dilemma - each is individually incentivized to continue spending, as the costs of not doing so are (potentially) devastating," TD Cowen analysts wrote in a report on Sunday.

TD Cowen reiterated its $165 price target for Nvidia, which it called its "Top Pick".

As investors gear up for quarterly reporting season, Apple rose 1.2% and Microsoft added 0.9%, helping drive the S&P 500 up 0.7% to its own record high.

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

Analysts expect spending to build out 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 lifted the S&P 500 to record highs, investors worry optimism about AI could evaporate if signs emerge of a slowdown in spending on the technology.