Nvidia stock surge pushes AI titan past US$2T in market value. What’s happening?

Nvidia, the chipmaker underpinning a much-hyped artificial intelligence revolution, saw its market capitalization pass US$2 trillion for the first time after markets opened Friday morning.

Shares of the Santa Clara, Calif.-based company continued a surge that began Wednesday after it reported earnings that surpassed expectations and that set out lofty expectations for demand in the year ahead.

Nvidia’s stock briefly crossed the US$800 per share mark on the NASDAQ Friday morning before retreating.

Nvidia added US$277 billion in market value Thursday, setting a new record for a single-day gain on Wall Street and helping push the S&P 500 to an all-time high.

At the same time, Canada’s main stock index closed at a 22-month high on Thursday, buoyed by gains in technology and healthcare stocks.

That has helped the company vault from to US$2 trillion from US$1 trillion market value in around eight months — the fastest among U.S. companies and in less than half the time it took tech giants Apple and Microsoft.

Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management, tells Global News that Nvidia’s rise is “something impossible to comprehend.”

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“Nvidia has been one of the most stunning performers the world has ever seen,” he says. “It all has to do with the insatiable demand for AI and what’s coming.”

Schwartz says that the large cap tech companies such as Amazon, Google, Meta and Microsoft have all signalled in their recent earnings calls that they intend to collectively invest billions this year to build out their capacities to handle the cloud computing workloads needed to power AI tech.

AI uses have exploded over the past year from engines like ChatGPT writing essays to more recent applications like Sora, which are capable of rendering full video based on simple prompts.

Since Nvidia is the market leader in producing the kinds of semiconductors that power the massive computing needs for these AI tools, Schwartz says that many of those companies’ investments are going to go directly to Nvidia in the years ahead.

Nvidia’s rapid ascent in the past year has led analysts to draw parallels to the picks and shovels providers during the gold rush of 1800s.

“The people who made the most money in the gold rush of the mid-1800s were the ones providing the tools to get the job done, not those hunting for the precious metal,” said Russ Mould, investment director at AJ Bell, per Reuters.

“Nvidia is effectively playing the same role today in this tech revolution.”

Schwartz cautions that there will likely be “boom-bust” cycles for AI and that Nvidia may not hold onto its market share as competitors like AMD and Taiwan Semiconductor try to edge out the current titan in the space.

“But the tailwinds for the next two to three years for Nvidia, because of the spend by the technology companies to rush into this goldmine of AI, it means that you’re looking at some pretty decent results from Nvidia going forward,” he says.

More to come

– with files from Reuters

&copy 2024 Global News, a division of Corus Entertainment Inc.


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