Nvidia could soon surpass Apple to become the world's second-most valuable company, as the biggest beneficiary of the surge in adoption of AI applications takes on the iPhone maker that has been the largest Wall Street firm by market value for years.

The reliance of virtually all artificial intelligence applications such as OpenAI's ChatGPT on Nvidia's high-end chips has helped the stock nearly triple in value over the past year to $2.68 trillion.

In contrast, Apple ceded its No. 1 spot to Microsoft earlier this year as the once high-flying company grapples with weak demand for its iPhones and tough competition in China. It was last valued at $2.92 trillion.

"It is certainly notable because Apple has been so dominant for so long, especially on the growth and innovation front. Recently though, Apple's innovation curve seems to have flattened, showing slower future growth," said Brian Mulberry, client portfolio manager at Zacks Investment Management.

"On the other hand, Nvidia has been able to catch wave upon wave of growth. Beginning with gaming demand, then crypto and now AI, they have been able to perfectly match innovation with demand and that equals explosive growth."

The semiconductor company is heavily weighted on the S&P 500 and the Nasdaq and has been pivotal in driving U.S. stocks to record highs. It accounted for more than a third of the S&P 500's gains this year.

Nvidia also became the fastest company to grow from $1 trillion to $2 trillion in 2024, zooming past Amazon.com , Google-parent Alphabet and Saudi Aramco .

Since its blowout forecast about a year ago, the company has consistently breezed past Wall Street's lofty expectations for revenue and profit, with demand for its graphic processors far outstripping supply as Big Tech rushes to embed AI applications.

Sharp increases in analysts' earnings estimates have resulted in a fall in the stock's forward earnings valuation, even with the share price racing higher.

It traded at 37 times forward earnings, compared with 48 times earnings a year ago, LSEG data showed.

Nvidia is also popular in the derivatives market. GraniteShares 2x Long NVDA Daily ETF, which tracks twice the daily percentage change in Nvidia, is the largest single stock ETF.

The fund clocked $1 billion in daily turnover for the first time ahead of Nvidia's results last week and its total net assets have hit a record $2.82 billion this week, according to Lipper data.

Options traders are bullish as Nvidia's volumes, particularly for calls, has picked up in recent sessions after the surge in its stock price.

Thursday marked the fifth straight session where more than a million Nvidia call options changed hands, the longest such streak in the stock's history, according to a Reuters analysis of Trade Alert data.

(Reporting by Medha Singh in Bengaluru and Saqib Iqbal Ahmed in New York)