Chip Giant Nvidia Nears Trillion-Dollar Bet on AI
CIOtechOutlook Team | Friday, 26 May 2023, 03:40 IST
Nvidia Corp jumped 24% in one of the highest one-day rises in value for a U.S. stock on Thursday, demonstrating that Wall Street has yet to price in AI's game-changing potential.
The spike more than doubled the stock's value this year, bringing the chip designer's market capitalization to about $939 billion.
Nvidia is now twice the size of the second-largest chipmaker, Taiwan's TSMC. Only Apple Inc, Alphabet Inc, Microsoft Corp, and Amazon.com Inc are worth more than a trillion dollars in the United States.
The positive earnings also triggered a rally in the chip sector and for AI-focused companies, propelling stock markets from Japan to Europe. Other than Amazon, Big Tech companies in the United States closed between 0.6% and 3.8% higher, with Advanced Micro Devices Inc closing 11% higher.
Analysts hurried to raise their price estimates on Nvidia stock, with 27 changing their minds about the company's dominance in the market for processors needed to power ChatGPT and other related services.
This year, the average price goal has more than doubled. Nvidia's valuation will be roughly $1.59 trillion at the highest estimate, a $644.80 price objective from Elazar Advisors.
"In the 15+ years we've been doing this job, we have never seen a guide like the one Nvidia just put up with the second-quarter outlook that was by all accounts cosmological, and which annihilated expectations," Bernstein analyst Stacy Rasgon said.
Nvidia, the fifth-most valuable business in the United States, forecast quarterly sales more than 50% higher than the average Wall Street estimate on Wednesday and said it will have more supply of AI chips in the second half to satisfy increased demand.
As generative AI is applied to every product and service, CEO Jensen Huang stated that $1 trillion in present data centre equipment would have to be replaced with AI processors.
The results bode well for Big Tech companies, which have shifted focus to AI on hopes the technology would help attract demand at a time their profit engines of digital advertising and cloud computing are under pressure from a weak economy.
Some analysts said Nvidia's results show that the generative AI boom could be the next big driver of growth.
"We're really just seeing the tip of the iceberg. This really could be another inflection point in technological history, such as the internal combustion engine - or the internet," said Derren Nathan, head of equity analysis at Hargreaves Lansdown.