Nvidia Corp experienced a significant surge of approximately 25% on the 25th of May, bringing its market value close to $1 trillion.
The company’s impressive forecast revealed that Wall Street has yet to recognize the transformative potential of AI investment fully.
This surge contributed to the stock’s more than two-fold increase this year, pushing its value up by around $190 billion to nearly $945 billion.
Consequently, Nvidia now surpasses Taiwan’s TSMC, becoming twice the size of the second most valuable chip firm.
While it fell just short of breaking the record for a U.S. company’s largest one-day value gain (held by Apple Inc), this accomplishment still generated considerable excitement.
Nvidia’s positive earnings report triggered a rally in the chip sector and AI-focused companies, resulting in stock market gains from Japan to Europe. Notably, in response, Alphabet Inc, Microsoft Corp, and AMD saw their stock prices rise between 3% and 10%.
Analysts quickly revised their price targets for Nvidia’s stock, with 27 raising their expectations. The prevailing sentiment is that Nvidia’s dominance in the market for chips powering AI applications, including ChatGPT, positions the company at the forefront of the AI industry.
This year, the mean price target for Nvidia’s stock has more than doubled. Rosenblatt Securities and HSBC hold the highest view, setting a price target of $600, which would value Nvidia at $1.48 trillion, surpassing Amazon.com Inc as the fourth most valuable U.S. company.
Industry experts like Stacy Rasgon of Bernstein were astounded by Nvidia’s second-quarter outlook, which far exceeded expectations and demonstrated unprecedented growth potential.
Nvidia’s CEO, Jensen Huang, projected that over $1 trillion worth of current data center equipment would need to be replaced with AI chips as generative AI becomes integrated into various products and services.
This optimistic outlook benefits Nvidia and suggests a promising future for other Big Tech companies.
With a shift towards AI, these companies hope to leverage the technology’s demand-generating potential, especially as their digital advertising and cloud computing sectors face challenges from a weakened economy.
The impressive results from Nvidia indicate that the generative AI boom could become a significant catalyst for future growth. Derren Nathan, head of equity analysis at Hargreaves Lansdown, even compared this potential to historical, technological inflection points, such as the internal combustion engine or the internet.