Oct 25 (Reuters) - Nvidia ( NVDA ) dethroned Apple ( AAPL )

as the world's most valuable company on Friday,

following a record-setting rally in the stock powered by an

insatiable demand for its new supercomputing AI chips.

Nvidia's ( NVDA ) stock market value briefly touched $3.53 trillion,

while that of Apple ( AAPL ) was $3.52 trillion, according to data from

LSEG.

In June, Nvidia ( NVDA ) briefly became the world's most valuable

company, before it was overtaken by Microsoft ( MSFT ) and

Apple ( AAPL ). The tech trio's market capitalizations have been

neck-and-neck for several months. Microsoft's ( MSFT ) market value stood

at $3.20 trillion.

Nvidia's ( NVDA ) stock has risen about 18% so far in October,

with a string of gains coming after OpenAI, the company behind

ChatGPT, announced a funding round of $6.6 billion. Nvidia ( NVDA )

provides chips used to train so-called foundation models such as

OpenAI's GPT-4.

"More companies are now embracing artificial intelligence in

their everyday tasks and demand remains strong for Nvidia ( NVDA )

chips," said Russ Mould, investment director at AJ Bell.

"It is certainly in a sweet spot and so long as we avoid a

big economic downturn in the United States, there is a feeling

that companies will continue to invest heavily in AI

capabilities, creating a healthy tailwind for Nvidia ( NVDA )."

Nvidia's ( NVDA ) shares hit a record high on Tuesday, building on a

rally from last week when TSMC, the world's largest

contract chipmaker, posted a forecast-beating 54% jump in

quarterly profit driven by soaring demand for chips used in AI.

The next big test will be when Nvidia ( NVDA ) reports

third-quarter results in November. Nvidia ( NVDA ) in August forecast

third-quarter revenue of $32.5 billion, plus or minus 2%,

compared with the current average analyst expectation of $32.90

billion, according to data compiled by LSEG.

Morgan Stanley analyst Joseph Moore said in a note dated

Oct. 10 that he remains "very bullish" about the company longer

term, but the recent rally "raises the bar for earnings

somewhat".

After a meeting with Nvidia's ( NVDA ) CEO Jensen Huang, Moore noted

the ramp up in production of its next-generation Blackwell chips

appeared to be "quite strong" and are booked out for 12 months.

The stock came under pressure in August after Nvidia ( NVDA ) confirmed

reports that the production of Blackwell chips was delayed until

the fourth quarter.

Shares of Nvidia ( NVDA ), Apple ( AAPL ) and Microsoft ( MSFT ) have an outsized

influence on the richly valued technology sector as well as the

broader U.S. stock market, with the trio accounting for about a

fifth of the S&P 500 index's weightage.

Frenzy around the prospects of AI, expectations that the

U.S. Federal Reserve will considerably bring down interest

rates, and most recently, an upbeat start to the earnings

season, have pushed the benchmark S&P 500 to an all-time high

last week.

Nvidia's ( NVDA ) massive gains have helped boost the stock's appeal

for option traders and the company's options are among the most

traded on any given day in recent months, according to data from

options analytics provider Trade Alert.

The stock has surged nearly 190% so far this year as a boom

in generative AI prompted the company to issue a series of

blowout forecasts.

"The question is whether the revenue stream will last for a

long time and will be driven by the emotion of investors rather

than by any ability to prove or disprove the thesis that AI is

overdone," said Rick Meckler, partner at Cherry Lane

Investments, a family investment office in New Vernon, New

Jersey.

"I think Nvidia ( NVDA ) knows that near term, their numbers are

likely to be quite remarkable."