Tech stocks are experiencing a significant surge as investor interest in artificial intelligence (AI) fuels a $4tn rally in the technology sector.
The Nasdaq stock exchange in the United States has achieved its highest point since August of the previous year, and chip manufacturer Nvidia is on the verge of joining the trillion-dollar club.
Stocks related to AI, including semiconductor manufacturers and software developers, have more than doubled in value as traders bet on the immense growth potential of the industry.
Despite concerns about job losses from automation, the AI rally has propelled the Nasdaq Composite share index by 23% this year.
The combined value of technology firms listed on the Nasdaq Composite reached $22tn on Friday, up from $18tn at the end of 2022, according to Refinitiv. Nvidia, renowned for its high-end chips that drive data centers utilized in generative AI applications such as ChatGPT, is on the brink of achieving a historic milestone as the first chip manufacturer with a market valuation surpassing $1tn.
Since the beginning of 2023, Nvidia’s share price has surged by 160%, increasing its market value from $361bn to over $940bn.
Nvidia’s shares experienced a 24% jump on Thursday amid predictions of skyrocketing chip demand.
The value of AI-related stocks soared by nearly $300bn during this rally, captivating the investment community with Nvidia’s exceptional performance. Market strategist Jim Reid from Deutsche Bank acknowledged the recent market frenzy surrounding AI.
Nvidia’s ascent has disrupted the traditional hierarchy of technology investments, dethroning the ‘Fang stocks’ (Facebook, Amazon, Netflix, and Google). Its market capitalization surpassed that of Meta, the parent company of Facebook, as AI took center stage in trading circles.
Jake Dollarhide, CEO of Longbow Asset Management, stated that Nvidia has become the focal point of the market due to investors’ obsession with AI.
Other companies in the AI space have also experienced substantial growth. C3.ai, a developer of AI applications, has seen its shares rise by over 156% this year.
The Botz exchange-traded fund, which invests in firms expected to benefit from increased adoption of robotics and AI, has gained 30% since the start of 2023. Microsoft, a significant investor in OpenAI (the creator of ChatGPT), has also profited from the AI boom, increasing its stock by 36% this year.
UBS bank analysis reveals that nearly 500 companies across 27 sectors have made over 3,500 references to generative AI and ChatGPT in their earnings calls since January.
UBS predicts that barriers to adopting generative AI models may diminish over time, pointing to Meta’s release of an open-source generative AI model (LLaMA) in February, spurring innovation within the developer community.