AI helps Nvidia 'sublimate', leaving all Wall Street experts stunned

The artificial intelligence (AI) boom is the launch pad for Nvidia. Shares of the chip designer jumped 28% on May 25, extending its growth this year, after the company reported an outlook that showed revenue could exceed Wall Street expectations by 50%.

Nvidia's market capitalization has doubled so far, adding about $210 billion to nearly $970 billion, making it the most valuable U.S. company in a single day. The previous record was held by Apple, which added $190 billion.

Nvidia breaks one-day market cap record previously held by Apple

Nvidia’s strong earnings also underscore a recovery in the chip sector as companies around the world from Europe to Japan focus on AI. In the U.S., other tech giants such as Alphabet, Microsoft and AMD also saw their market capitalizations rise by 2% to 9%.

Analysts have raised their price targets on Nvidia's stock, saying all AI "roads" lead to the company because it is the supplier of processing power for chatbots like ChatGPT and many similar services.

In some optimistic scenarios, such as the $600 price target from Rosenblatt Securities and HSBC, Nvidia would be worth $1.48 trillion, surpassing Amazon, the fourth-largest company in the US.

“In over 15 years of doing this, we have never seen anything like Nvidia’s Q2 outlook. It simply shattered expectations,” said Stacy Rasgon of Bernstein.

Earlier on May 24, Nvidia, the fifth-largest company in the US, forecast quarterly revenue 50% higher than Wall Street's average estimate, and said it would boost AI chip supply in the second half of 2023 to meet rising market demand.

CEO Jensen Huang said that the current $1 trillion worth of equipment in data centers will be replaced by AI chips, as the technology is being integrated into every product and service.

It's also a good sign for tech giants that have shifted their focus to AI in hopes that the technology can drive demand at a time when digital advertising - their main revenue driver - and cloud computing are under pressure from macroeconomic factors.

“Nvidia’s forecast completely changes the narrative around AI and the future needs of enterprises. This could be the AI revolution with Nvidia as a key barometer,” said Dan Ives of Wedbush.

(According to Reuters)

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