Nvidia rose 9% on Thursday as its strong earnings forecast boosted investor confidence in an AI-driven boom in chip demand, pushing up stocks across the semiconductor sector.
Expectations for Nvidia were high, with its shares trading near all-time highs ahead of the earnings report, which also capped a strong quarter for U.S. tech giants including Microsoft, with AI emerging as a key growth driver.
“As companies, especially the big tech companies, continue to increase capital spending to keep up with this revolutionary technology, Nvidia is by far the biggest beneficiary,” said Josh Gilbert, market analyst at eToro.
The company also announced a 10-for-1 stock split on Wednesday and raised its quarterly dividend by 150% as demand continues to outstrip supply for the high-performance chips that power nearly all AI applications, including OpenAI’s ChatGPT. .
Nvidia, already the world’s third most valuable company, was scheduled to add another $210 billion to its $2.335 trillion market value.
The company’s shares are poised to surpass $1,000, and a close above that level would mark a major milestone for the company, which has risen more than 90% this year after more than tripling in 2023.
Thursday’s jump also comes after Taiwanese contract semiconductor maker TSMC, a major Nvidia supplier, said it expected the global semiconductor industry, excluding memory chips, to grow 10% annually.
TSMC’s U.S.-listed shares rose 1.9%, while other AI-focused semiconductor stocks such as Advanced Micro Devices, Arm, Broadcom and Super Micro Computers rose 2.2% to 9.2%.
Analysts welcomed comments from NVIDIA executives that the company’s new Blackwell AI chips will start shipping this quarter and that demand for processors could outstrip supply “well into next year.”
Chief Executive Officer Jensen Huang told Reuters he hopes new AI models that can create videos and engage in human-like voice interactions will lead to increased orders for Nvidia’s processors.
“With the competition having been going on for years, we believe Nvidia is comfortable defending and maintaining its market share,” said Ido Caspi, a research analyst at Global X, which invests in Nvidia.
“Continued demand for Hopper (Nvidia’s current chip) should help alleviate investor concerns that customers may delay purchases in anticipation of the transition to Blackwell.”
Analysts also said a stock split could make Nvidia more attractive to retail investors after interest waned this year.
At least 28 of 58 brokerages raised their price targets for the stock, pushing the median target to $1,180, according to LSEG data.
Nvidia’s 12-month forward price/earnings ratio is 34.7 times, compared to AMD’s 38 times and Super Micro Computer’s 26.8 times.
