Nvidia is racing toward the $1 trillion club as the AI ​​frenzy sends chip stocks soaring

Nvidia’s massive earnings put the Silicon Valley company on track to become the first chip maker to be valued at more than $1 trillion, as surging demand for artificial intelligence processors sent semiconductor stocks higher Thursday.

Shares in Nvidia rose 25 per cent in pre-market trading after its $11 billion sales forecast for the three months through July came in more than 50 per cent ahead of Wall Street’s previous estimate.

If the movement continues in normal trading hours, Nvidia could add nearly $200 billion to its market capitalization, more than the entire value of Intel, AMD or Qualcomm and the largest one-day gain ever for a US stock, according to Bloomberg numbers. The increase would put the $50 billion mark joining Apple, Microsoft, Alphabet and Amazon in the elite group of companies valued at more than $1 trillion.

Besides Nvidia, chip suppliers including Taiwanese manufacturer TSMC and ASML posted the biggest gains, up 3.5 percent and 5 percent, respectively.

Line chart showing Nvidia soaring in increasing AI revenue

Wednesday’s results reinforced Nvidia’s claim to be the only company whose technology can meet demand from across the industry to build generative artificial intelligence systems, capable of creating human-like content. The group cited “exponential growth” in demand for computing power from cloud and internet companies as well as the automotive industry, financial services, healthcare and telecoms.

The products, including Nvidia’s most powerful H100 processor, have become much coveted, not only by big tech companies but also by a new wave of AI startups, such as OpenAI and Anthropic, which have raised billions of dollars in venture funding over recent months.

“We’re clearly seeing an exponential rise in demand for AI, and Nvidia is at the forefront of that,” said Jeff Blaber, CEO of technology advisory firm CCS Insight, describing its chips and allied software tools as the “picks and scoops” of the “generational shift in intelligence.” “They are undoubtedly in the first place because they provide a very comprehensive toolchain that no other company can currently offer.”

AMD, which like Nvidia makes specialty chips best suited for training large sets of data for artificial intelligence, jumped 9 percent in pre-market trading, while Micron, a US memory chip supplier that faces new trade restrictions in China amid escalating tensions with China. . The United States, it jumped 4 percent before the opening. Stocks in Microsoft and Google also rose.

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A number of US and Japanese equipment suppliers to chip makers also rose. Tokyo Electron rose 3 percent, while Tokyo-based Advantest, which makes semiconductor test kits, rose 16 percent. In the US, Applied Materials and LAM Research were slightly higher in pre-market trading.

However, Intel — which investors see as lagging behind in the move to AI — fell 1 percent before the market opened, as investors bet AI will accelerate a fundamental shift in data center technology at cloud providers such as Microsoft. and Amazon and Google, along with Internet groups including Meta.

Even before Thursday’s move, shares in Nvidia doubled in 2023, as last year’s concerns about a slowdown in post-pandemic cloud spending by big tech companies gave way to feverish enthusiasm for a new generation of artificial intelligence, led by chatbots like OpenAI ChatGPT and Google. cool.

Even with Amazon, Google, Meta and Microsoft investing in its AI chips, analysts said few companies could match Nvidia’s technological edge.

Over recent years, Nvidia stock has risen and fallen along with previous waves of hype around cryptocurrency and earlier generations of artificial intelligence such as self-driving that failed to live up to its initial promise.

But Nvidia CEO Jensen Huang said on a Wednesday call with analysts that 15 years of investment and capacity expansion left Nvidia in the right place at the right time when ChatGPT kicked off an even bigger investment cycle by the world’s richest companies.

“When generative AI came along, it launched a killer application for this computing platform that had been in the works for some time,” he added.

“With generative AI being the primary workload for most global data centers generating information, it’s now very clear that . . . the data center budget will shift very dramatically toward accelerated computing, and you’re seeing that now.”

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