Nvidia (NVDA-Q) moved closer to a $2 trillion market value following the surpassing of Wall Street’s expectations, reigniting a global surge in tech stocks driven by the demand for AI chips.
With a 13.5% surge in shares before Thursday’s opening bell, the chip supplier is poised to reclaim its position as the third most valuable U.S. company, potentially adding over $230 billion to its market capitalization.
Having soared by almost 36% this year, Nvidia stands out as the top performer in the S&P 500, significantly contributing to the index’s record highs in 2024.
Russ Mould, investment director at AJ Bell, likened Nvidia’s role in the current tech revolution to the suppliers in the mid-1800s gold rush, emphasizing the importance of providing essential tools for advancement.
The increasing demand for Nvidia’s chips, particularly for AI applications, has led the company to forecast a remarkable 233% growth in first-quarter revenue, surpassing market expectations of a 208% rise.
The positive momentum in Nvidia’s stock boosted related companies such as Advanced Micro Devices, Super Micro Computer, and Arm Holdings, along with the iShares semiconductor ETF.
The premarket surge in chip stocks also had a ripple effect, lifting Nasdaq 100 futures by 2% and propelling Japan’s Nikkei share average to a record high, surpassing the levels seen during the 1989 bubble era.
With shares reaching \(766, Nvidia was on course to achieve a new record high at the market open, driven by a threefold increase in fourth-quarter revenue to \)22.10 billion.
The robust demand for Nvidia’s graphic processing units from major data centers undergoing AI upgrades has been a key driver of its revenue growth over the past three quarters.
Although concerns linger about U.S. restrictions on chip sales to China impacting revenue growth, Nvidia remains optimistic about its strong product demand. However, analysts caution that future outperformance may become more challenging.
Trading at approximately 29 times its earnings expectations for the next 12 months, Nvidia’s valuation multiple has decreased from 47 a year ago, despite its rising share price, reflecting a more favorable forward earnings valuation.
