Nvidia became the world’s most valuable company after its share price climbed to an all-time high on Tuesday.

The stock ended the trading day at nearly $136, up 3.5%, making it more valuable than Microsoft. It overtook Apple earlier this month.

American company Nvidia makes computer chips needed for artificial intelligence (AI) software, and demand for its products has boosted its sales and profits over the last few years.

Many investors believe its earnings can grow even more, which has caused its share price to soar, though some have questioned its sky-high valuation.

Tuesday’s share price rally means the market now values the company at $3.34tn (£2.63tn), with the price having nearly doubled since the start of this year.

Eight years ago, the stock was worth less than 1% of its current price.

Competition among AI developers is fierce. Microsoft, Google-owner Alphabet, Meta and Apple are just some of the tech heavyweights battling to create a world-beating product.

This competition benefits Nvidia, which dominates the vast majority of the AI chip market.

As such, investors believe the company will continue to surge in value. Nvidia’s sales and profit figures have surpassed many analyst expectations in recent years.

In May, after its latest set of financial results were published, Quilter Cheviot technology analyst Ben Barringer said the company had "once again cleared a very high hurdle".

"Demand is showing no signs of switching off either," he added.

However, a minority are more cautious.

In February, Barclays credit analyst Sandeep Gupta argued that Nvidia’s large market share would be hard to maintain given the increasing number of rivals and questioned how Nvidia’s customers would monetise AI software.