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Nvidia's results spark nearly $300 billion rally in AI stocks

Published 05/24/2023, 06:50 PM
Updated 05/24/2023, 07:17 PM
© Reuters. FILE PHOTO: AI Artificial Intelligence words are seen in this illustration taken, May 4, 2023. REUTERS/Dado Ruvic/Illustration

© Reuters. FILE PHOTO: AI Artificial Intelligence words are seen in this illustration taken, May 4, 2023. REUTERS/Dado Ruvic/Illustration

By Noel Randewich and Sinéad Carew

(Reuters) -Stocks related to artificial intelligence surged in extended trade on Wednesday, adding almost $300 billion in market capitalization after chipmaker Nvidia (NASDAQ:NVDA) Corp forecast strong revenue growth and said it was boosting production of its AI chips to meet surging demand.

Nvidia's stock zoomed as much as 28% after the bell to trade at $391.50, its highest level ever. That increased its stock market value by about $200 billion to over $960 billion, extending the Silicon Valley company's lead as the world's most valuable chipmaker and Wall Street's fifth-most valuable company.

"With all the enthusiasm around AI and the fact Nvidia delivered a huge beat for first-quarter results and second-quarter estimates, this gives some actual evidence AI is for real," said Daniel Morgan, senior portfolio manager at Synovus (NYSE:SNV) Trust in Atlanta. Morgan said Synovus owns Nvidia shares.

Nvidia forecast quarterly revenue more than 50% above Wall Street estimates, with Chief Executive Officer Jensen Huang saying in a statement the company is "significantly increasing our supply to meet surging demand" for its data center chips.

Shares of other corporations related to AI rallied on the back of Nvidia's strong report, adding another nearly $100 billion in stock market value after the bell.

Rival chipmaker Advanced Micro Devices (NASDAQ:AMD) Inc jumped 10%. Microsoft Corp (NASDAQ:MSFT) and Google parent Alphabet (NASDAQ:GOOGL) Inc, which are both rushing to incorporate generative AI into their Web search platforms, each rose about 2%.

AI software maker C3.ai and Palantir Technologies (NYSE:PLTR), which recently launched its own AI platform, both soared about 8%.

© Reuters. FILE PHOTO: AI Artificial Intelligence words are seen in this illustration taken, May 4, 2023. REUTERS/Dado Ruvic/Illustration

Interest in AI surged this year after startup OpenAI introduced ChatGPT, attracting over a million users within a week. Using past data, generative AI can create new content like fully formed text, images and software code.

Ahead of Nvidia's report on Wednesday, optimism around AI had already fueled a 109% surge in its stock so far in 2023, making the chipmaker the S&P 500's top performer year-to- date. That rally left Nvidia trading at about 60 times expected earnings, approaching its peak of 68 times expected earnings in 2021, according to Refinitiv data.

Latest comments

"the fact Nvidia delivered a huge beat for first-quarter results and second-quarter estimate"  First part is not factually correct.They did beat poor expectations which are still lower YoY and the second part is true - wishes for the future are optimistic which may turn true but it suggest there are one-off investments made into AI  the hype of AI but says nothing about how sustainable is that, and current valuation implies this market is 1/3 of what Apple sells to global consumers which is insane. But we know the valuation often times is absurd short term in times of bubbles. If Nvidia remains revenues flat then the price should be 50 USD. If Nvidia grows really fast like 25-30% YoY for the next several years then 200 USD would be justfiied. 400 USD means that this company needs to grow 50-100% YoY
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