Nvidia races towards the $1 trillion club as AI frenzy drives up chip stocks

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Nvidia’s explosive earnings have put the Silicon Valley company on course to become the first chipmaker to be valued at more than $1 trillion as booming demand for its AI processors drives inventories up. of semiconductors on Thursday.

Shares of Nvidia are up 25% in premarket trading after its own Sales forecast of 11 billion dollars for the three months ending in July, it exceeded previous Wall Street estimates by more than 50%.

If the move continues into 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 on record for a U.S. stock, according to Bloomberg data. The raise would bring it within $50 billion of joining Apple, Microsoft, Alphabet and Amazon in the elite group of companies valued at over $1 trillion.

Along with Nvidia, chip vendors including Taiwanese maker TSMC and Dutch equipment maker ASML posted the largest gains, of 3.5% and 5%, respectively.

Wednesday’s results strengthened Nvidia’s claim that it is the only company whose technology can meet industry-wide demand to build TO THE, systems capable of creating human-like content. The group pointed to the “exponential growth” in demand for computing power from cloud and internet companies, as well as the automotive, financial services, healthcare and telecommunications sectors.

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

“We are obviously seeing a huge increase in the demand for AI and Nvidia is at the forefront of that,” said Geoff Blaber, managing director of CCS Insight, a technology consultancy, describing its chips and related software tools as “picks and shovels” of a “generational shift in AI”. “They are undoubtedly in pole position because they provide a very complete toolchain that no other company is currently able to provide.”

AMD, which like Nvidia makes the specialized chips best suited to training large datasets for artificial intelligence, climbed 9% in premarket trading, while Micron, the US memory chip supplier facing new Trade restrictions in China amid rising tensions with the United States, have risen 4% since the opening. Shares of Microsoft and Google also rose.

Several US and Japanese equipment suppliers to chip makers have also increased. Tokyo Electron climbed 3%, while Tokyo-based Advantest, which makes semiconductor test kits, climbed 16%. In the US, Applied Materials and Lam Research were slightly higher in pre-market trading.

However, Intel, seen by investors as lagging behind in the transition to AI, is down 1% since market opening as investors bet AI would accelerate a fundamental shift in data center technology at vendors. of cloud services such as Microsoft, Amazon and Google, along with internet groups including Meta.

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

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

Over the past few years, Nvidia’s stock has risen and fallen along with previous waves of hype cryptocurrencies and previous generations of AI such as autonomous driving that have failed to deliver on their initial promise.

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

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

“With Generative AI becoming the core workload of most of the world’s data centers that generate information, it is very clear now that . . . A data center budget is going to shift very drastically towards accelerated computing, and you’re seeing it now.”