Nvidia close to being first trillion-dollar chip firm on AI use
US company dominates the market for chips used to power ChatGPT and many similar services, a major reason behind the stock surge.
Shares of Nvidia Corp are up about 26 percent, pushing it closer to a $1 trillion market cap after the chip designer’s stellar revenue forecast showed that Wall Street has yet to price in the game-changing potential of artificial intelligence.
Thursday’s gain contributed to a more than two-fold increase in the stock this year and would boost Nvidia’s value by about $196 billion to nearly $951 billion, putting it on course for the largest one-day value gain for a U.S. company.
That market capitalization makes Nvidia twice the size of the second largest chip company, Taiwan’s TSMC. In the United States, it tracks only the billion-dollar companies Apple Inc, Alphabet Inc, Microsoft Corp, and Amazon.com Inc.
The rosy gains also sparked a rally in the chip sector and for AI-focused companies, lifting equity markets from Japan to Europe. In the US, Big Tech companies other than Amazon rose 0.7 percent to 3.5 percent, while Advanced Micro Devices Inc rose 10 percent.
Analysts rushed to raise their price targets for Nvidia stock, with 27 raising their views on the idea that all roads in AI lead to the company as it dominates the market for chips used to power ChatGPT and many similar services .
The average price target has more than doubled this year. At its highest position, a $644.80 price target from Elazar Advisors, Nvidia would be worth $1.59 trillion, about Alphabet’s.
“In the more than 15 years of doing this work, we’ve never seen a guide like the one Nvidia just put out with its Q2 outlook that was cosmological in every way and shattered expectations,” said Stacy Rasgon of Bernstein Research. .
Nvidia, the fifth most valuable U.S. company, forecast Wednesday that its quarterly revenue would be more than 50 percent above the average Wall Street estimate and said it would have more AI chip supply in the second half to drive a surge. of the demand.
CEO Jensen Huang said $1 trillion of current equipment in data centers should be replaced with AI chips as generative AI is applied in every product and service.
The results bode well for big tech companies, which have shifted their focus to AI in hopes that the technology would help boost demand at a time when their profit engines of digital advertising and cloud computing are squeezed by a weak economy .
Some analysts said Nvidia’s results show the generative AI boom could be the next big growth driver.
“We are really only seeing the tip of the iceberg. This really could be another turning point in technology history, like the internal combustion engine or the internet,” said Derren Nathan, head of equity analysis at Hargreaves Lansdown.