Nvidia adds record $277 billion in stock market value

Nvidia added USD 277 billion in stock market value on Thursday, Wall Street's largest one-day gain in history, after the chipmaker's quarterly report beat expectations and reignited a rally fueled by optimism about artificial intelligence.

The company's shares soared 16.4% to close at USD 785.38, a record high close, lifting its market capitalization to USD 1.96 trillion after its January quarterly report showed late Wednesday that demand for its specialized chips used in artificial intelligence computing continued to outpace analysts' already-high expectations.

The Santa Clara, California-based company's results fed new fuel to a global rally in technology stocks linked to artificial intelligence, propelling the S&P 500, Europe’s STOXX 600, and Japan's Nikkei share average to record highs.

Traders exchanged USD 65 billion worth of Nvidia stock on Thursday, accounting for almost a fifth of all trading in S&P 500 stocks.

Nvidia's one-day increase in stock market value was the largest in Wall Street history, easily surpassing a record USD 196 billion gain from Meta Platforms on February 2 after the Facebook parent declared its first dividend and posted robust results.

The rise in Nvidia's market value on Thursday eclipsed the entire value of Coca-Cola, at USD 265 billion.

Its gains make Nvidia the third-largest company by value on the U.S. stock market, surpassing Amazon.com and Alphabet after competing with the two powerful technology companies in recent weeks.

Microsoft and Apple, worth USD 3.06 trillion and USD 2.85 trillion respectively, are the two most valuable companies on Wall Street.

Nvidia stock has now climbed 58% in 2024, accounting for more than a quarter of the S&P 500's gains so far this year. This makes Nvidia's prospects crucial not only to direct shareholders but also to owners of index funds widely held in retirement savings accounts.

“The people who made the most money in the mid-19th century gold rush of the mid-1800s were the ones providing the tools to get the job done, not those hunting for the precious metal,” said Russ Mould, investment director at AJ Bell.

“NVIDIA is effectively playing the same role today in this tech revolution.”

Soaring demand for Nvidia chips used by companies rushing to improve their AI offerings has helped the Silicon Valley company forecast a massive 233% growth in revenue for the current quarter, exceeding market expectations, with a 208% increase.

Other chipmakers exposed to AI also rallied, with Advanced Micro Devices shares up about 11% and Broadcom shares up 6.3%. The Philadelphia Chip Index rallied 4.97% to a record high, its biggest daily gain since May 2023.

The S&P 500 surged 2.11% to a record high, and the Nasdaq jumped nearly 3%, leaving it close to its first record close since November 2021.

Super Micro Computer, which sells AI-related server equipment, jumped over 30%, bringing its gain this year to over 240%.

Nvidia, which controls about 80% of the high-end AI chip market, reported its fourth-quarter revenue more than tripled from a year earlier to USD 22.1 billion.
However, some analysts worry that US restrictions on chip sales to China could hurt its revenue growth. Sales in China accounted for about 9% of Nvidia's sales in the fourth quarter, up from 22% in the previous quarter.

Rapid increases in analysts' financial estimates mean that the valuation of Nvidia's future earnings has fallen, even after its shares more than tripled last year. Before Nvidia's report, it was valued at about 30 times expected earnings, up from 49 times the previous year, according to LSEG data.

However, many investors are concerned about the rapid pace of Nvidia's earnings.

“We've gotten well ahead of expectations and baked in a lot over the next three years,” said Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest.

At least 17 brokerage firms raised their target prices after the results. Among the most bullish, Rosenblatt Securities raised its price target to USD 1,400 from USD 1,100, implying a market cap of USD 3.5 trillion in stock market value.

UBS cut its price target to USD 800 from USD 850, reflecting a "potential slowdown in revenue growth."

Short sellers betting Nvidia’s stock would fall rushed to close those trades on Thursday, said Ihor Dusaniwski, managing director of predictive analytics at S3 Partners.

Short sellers had lost over USD 2 billion on paper, taking their declines to more than USD 6.8 billion so far this year, Dusaniwski said.

Also Read: Amazon looking to launch low-priced fashion and lifestyle products vertical in India