Nvidia races to $1 trillion club as AI frenzy boosts chip stocks

Nvidia’s strong sales forecast has put the Silicon Valley company on track to become the first chipmaker valued at more than $1 trillion as booming demand for its AI processors sent prices up. semiconductor stocks on Thursday.

Nvidia’s shares rose 23 percent Thursday morning in New York after its sales forecast of $11 billion for the three months ending in July topped earlier Wall Street estimates by more than 50 percent. Street.

Nvidia added about $170 billion to its market value after Wednesday’s quarterly report, more than the total value of Intel or Qualcomm and the biggest single-day gain for a US stock, according to Bloomberg figures. With a market capitalization of $927.2 billion, Nvidia appears close to joining Apple, Microsoft, Alphabet, Amazon and Saudi Aramco in the elite group of companies valued at more than $1 trillion.

Along with Nvidia, chip vendors including Taiwanese maker TSMC and Dutch equipment maker ASML reported the biggest gains, up 3.5% and 5% respectively.

Wednesday’s results reinforced Nvidia’s claim to be the only company whose technology is capable of meeting industry-wide demand to build generative AI systems capable of creating human content. The group pointed to “exponential growth” in demand for computing power from cloud and Internet companies, as well as from the automotive, financial services, healthcare and telecommunications industries.

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

“Obviously we’re seeing a huge increase in demand for AI and Nvidia is on the front lines of that,” said Geoff Blaber, chief executive of CCS Insight, a technology consultancy, describing its chips and related software tools as “picks and shovels.” ”. ” of a “generational shift in AI”. “Without a doubt, they are in the first position because they provide a very complete tool chain that no other company can offer today.”

AMD, which like Nvidia makes the specialized chips best suited to training large data sets for AI, rose 8 percent in early trading, while Micron, the US memory chip supplier facing new trade restrictions in China. amid rising tensions with the US it rose 4 percent. Shares of Microsoft and Google also rose.

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Several American and Japanese equipment suppliers to chipmakers also rose. Tokyo Electron rose 3 percent, while Tokyo-based Advantest, which makes semiconductor test equipment, rose 16 percent. In the US, Applied Materials and Lam Research were slightly higher in premarket trading.

However, Intel, seen by investors as a laggard on the transition to AI, fell 5 percent in early trading as investors bet AI would accelerate a fundamental shift in data center technology at vendors. from the cloud such as Microsoft, Amazon and Google, along with internet groups including Meta.

Even before Thursday’s move, Nvidia’s shares had doubled in 2023, as concerns last year about a slowdown in cloud spending after a pandemic-era splurge by Big Tech gave way to a frenetic enthusiasm for a new generation of AI, led by chatbots like OpenAI. ChatGPT and Google Bard.

Even as Amazon, Google, Meta and Microsoft all invest in their own custom AI chips, analysts said few companies could match Nvidia’s technological edge.

In recent years, Nvidia’s shares have gone up and down alongside previous waves of hype around cryptocurrencies and earlier generations of AI, such as autonomous driving, that failed to deliver on their initial promise.

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

“When generative AI came along, it triggered an excellent application for this computing platform that has been in the pipeline for some time,” he added.

“With generative AI becoming the primary workload for most of the world’s data centers generating insights, it is now abundantly clear that . . . a data center budget will shift dramatically toward accelerated computing, and that’s what you’re seeing now.”