Nvidia soared to a market cap of $2 trillion on Thursday after a surge in demand for AI chips once again exceeded Wall Street’s sky-high expectations and reignited a global rally in tech stocks.
The company’s stock price rose 15%, or more than $100, to a record high of $780.85, making it the third most valuable U.S. company. If these gains hold, Nvidia’s market capitalization will increase by about $260 billion.
The rise in the top-performing S&P 500 stock index also led to higher stock prices in the semiconductor sector, with benchmark indices Europe’s STOXX 600 and Japan’s Nikkei stock average also hitting record highs.
The stock, which has soared nearly 57% this year, has emerged as the centerpiece of Wall Street’s rally, accounting for more than a quarter of the S&P 500’s gains in 2024, and its quarterly results are crucial for stock investors. It has become.
“This just shows you how dominant they are in an incredibly high-growth space,” said Paul Marino, chief revenue officer of the GraniteShares ETF.
“Everything they do in the semiconductor space, from robotics, cryptocurrencies, AI, gaming to self-driving cars. They produce the best chips, and people don’t seem to be swayed by their high praise.”
If Nvidia reaches the $2 trillion mark, it will reach the milestone at the fastest pace in history by adding $1 trillion in just about nine months.
A surge in demand for Nvidia’s chips, used by companies rushing to upgrade their AI products, has prompted the Silicon Valley company to forecast a staggering 233% revenue jump in the first quarter, beating market expectations for 208%. % increase.
Nvidia’s gains led AI rival Advanced Micro Devices Inc. to rise 10%, Super Micro Computer Inc. to rise 20% and Arm Holdings Inc. to rise 9.5%. The Philadelphia Chip Index rose nearly 4.4%.
Nvidia, which controls about 80% of the high-end AI chip market, reported that fourth-quarter revenue more than tripled from a year earlier to $22.1 billion.
The company’s revenue has continued to grow for three quarters due to strong demand for graphics processing units from large data centers in the midst of AI upgrades.
“The people who made the most money in the gold rush of the mid-1800s weren’t the people who were looking for precious metals, they were the people who provided the tools to get the job done,” said Russ Mold, investment director at AJ Bell. Ta.
“NVIDIA is playing virtually the same role in this technology revolution today.”
But analysts are concerned that U.S. curbs on semiconductor sales to China may be hurting sales growth. Sales in China accounted for about 9% of Nvidia’s fourth-quarter sales, down from his 22% in the previous quarter.
According to LSEG data, the company trades at about 29 times expected earnings for the next 12 months, compared to an industry median of 25.3 times. A year ago, the valuation multiple was 47x.
The rapid rise in analyst earnings estimates means that future earnings valuations are falling, even as the stock price rises further.
“We’ve far exceeded expectations and have a lot to build on over the next three years,” said Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest.
At least 17 securities companies raised their price targets following the results.
Rosenblatt Securities is the most bullish, with forward-looking price forecasts suggesting NVIDIA will reach a market cap of $3 trillion over the next 12 months.
Meanwhile, short sellers who had raised bearish bets on Nvidia quickly exited on Thursday, increasing buying pressure, said Ihor Dusaniowski, managing director of predictive analytics at S3 Partners.
Dusaniwski said short sellers had a paper loss of $2.2 billion on the 11.75% rise in the stock, bringing their losses so far this year to $6.84 billion.
Short selling is borrowing a stock and selling it in the hope that the price will go down. However, if the price increases, the seller is exposed to potentially unlimited losses.
