Nvidia’s soaring sales forecast is putting the Silicon Valley firm on track to become the world’s first chipmaker valued at over $1tn. The booming demand for artificial intelligence processors has driven semiconductor stocks higher Thursday.
Nvidia shares rose by 24 per cent following its $11bn revenue forecast that came in 50 per cent above Wall Street’s prior estimates for the three-month period ending in July.
Bloomberg reports that Nvidia’s market capitalisation increased by $184bn following its quarterly report on Wednesday. This is more than Intel or Qualcomm combined and represents the largest one-day increase for US stocks. Nvidia’s market capitalisation is $939bn. It appears to be on track to join Apple, Microsoft Alphabet, Amazon, and Saudi Aramco as part of the elite group of companies worth more than $1tn.
Chip suppliers such as Taiwanese chip manufacturer TSMC, and Dutch equipment maker ASML also reported significant gains. They were up by 3 percent and almost 5 percent, respectively. The results of Wednesday’s conference bolstered Nvidia’s claim that it is the only company with the technology to meet the demand of the entire industry for generative AI systems, capable of creating content similar to humankind. The group cited “exponential” growth in the demand for computing power, particularly from cloud and Internet companies, as well as automotive, financial service, healthcare, and telecoms industries.
Nvidia’s H100 processor, the most powerful in its class, is highly sought-after by Big Tech firms, but also by a new generation of AI start ups such as OpenAI, and Anthropic. These companies have raised millions of dollars of venture capital funding over the past few months.
Geoff Blaber of CCS Insight a tech consulting firm said that Nvidia’s chips and software tools are the “picks-and-shovels” for a “generational change in AI”. They are in pole position, because they offer a comprehensive toolchain which no other company can currently provide.
AMD, like Nvidia, makes specialised chips that are best for training large sets of data to train AI. Micron, an American memory chip provider, is facing new trade restrictions in China due to escalating tensions between the US and China. Microsoft and Google also saw their shares rise.
A number of US and Japanese chipmakers’ equipment suppliers also saw their shares rise. Tokyo Electron rose 3 percent, while Advantest in Tokyo, which produces semiconductor testing kits, grew 16 percent. Applied Materials and Lam Research both rose in the US.
Investors bet on AI to accelerate the fundamental shift in cloud provider technology, including Microsoft, Amazon, and Google. Internet groups such as Meta also bet on AI.
Shares of Nvidia doubled before Thursday’s announcement, as fears about a slowdown on cloud spending following a Big Tech splurge during the coronavirus pandemic era gave way to a frenzied excitement for a new breed of AI led by chatbots like OpenAI’s ChatGPT or Google’s Bard.
Analysts said that despite the fact that Amazon, Google Meta, Microsoft and Microsoft have all invested in custom AI chips, few companies can match Nvidia’s technological advantage.
In recent years, Nvidia stock has fluctuated along with previous hypes around cryptocurrencies and older generations of AI like autonomous driving which failed to deliver their initial promises.
On Wednesday, Jensen Huang said that Nvidia was in the perfect place at the ideal time to benefit from ChatGPT, which triggered a new investment cycle among the world’s wealthiest companies.
He added that “when generative AI was introduced, it triggered an app killer for this computing platform which had been prepared for some time.”
“It is now very evident that the majority of data centres around the world are generating information using generative AI. . . “The budget of a Data Centre will dramatically shift towards accelerated computing. You can see that happening now.”