The AI hype might be more than just hype.
Getty Images/Justin Sullivan
There’s a puddle on the floor of the New York Stock Exchange, and it’s from investors drooling over the potential of Nvidia, a tech giant enabling the AI revolution.
On the heels of its jaw-dropping earnings report on Wednesday, Nvidia shares spiked 24.4% yesterday and it came oh-so-close to setting the record for the biggest one-day gain in market capitalization of a US company ever.
At Nvidia’s current market cap of $939 billion, it’s on its way to becoming just the fifth public US company worth more than $1 trillion—and the first chipmaker to reach the milestone. Only Apple, Microsoft, Alphabet, and Amazon are sipping Dom in the four-comma club.
Why are investors so bullish on Nvidia?
Because if artificial intelligence is the next gold rush, Nvidia sells the pickaxes.
Nvidia makes the chips used to train AI models—for instance, ChatGPT’s training was powered by 10,000 Nvidia graphic processing units (GPUs) on a Microsoft supercomputer, according to the BBC.
And as every company scrambles to add AI to their products, demand for that hardware is booming. In its gangbusters earnings report earlier this week, Nvidia projected $11 billion in revenue this quarter, annihilating expectations for $7.2 billion. But the potential is much greater: Nvidia’s CEO Jensen Huang (now a very rich man) said that as more companies integrate AI, $1 trillion worth of outdated data center equipment would have to be swapped out for new chips.
Analysts freaked out after listening to Huang talk about Nvidia’s position at the center of the AI universe.
- “We simply have no historical precedent for the magnitude of this step function.”—Morgan Stanley
- “The magnitude of upside is stunning.”—Truist
- “Almost unimaginable.”—Susquehanna
Bottom line: That Nvidia is making so much money already from AI dispels the idea that the tech is a bubble and suggests that we’re on the cusp of an AI-powered Fourth Industrial Revolution, Wedbush’s Dan Ives argued.—NF