Nvidia added USD277 billion (RM1,323.36 billion) in stock market value on Feb 22, Wall Street’s largest one-day gain in history after the heavyweight chipmaker’s quarterly report beat expectations and reignited a rally fuelled by optimism about artificial intelligence (AI).
The company’s stock soared 16.4 per cent to close at USD785.38, a record-high close, lifting its market capitalisation to USD1.96 trillion after its fourth-quarter report late on Feb 21 showed demand for its specialised chips used in AI computing continued to outpace analysts’ already-high expectations.
Nvidia’s results fed new fuel to a global rally in technology stocks linked to AI, propelling the S&P 500, Europe’s STOXX 600 and Japan’s Nikkei share average to record highs.
Traders exchanged USD65 billion worth of Nvidia’s shares on Feb 22, 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’s history, easily beating a record US$196 billion gain by Meta Platforms on Feb 2 after the Facebook parent declared its first dividend and posted robust results.
The rise in Nvidia’s market value on Feb 22 eclipsed the entire value of Coca-Cola, at USD265 billion.
Its gain made Nvidia the US stock market’s third-most valuable company, pulling ahead of Amazon.com and Google parent Alphabet after jockeying with the two tech powerhouses in recent weeks.
Microsoft and Apple, valued at USD3.06 trillion and USD2.85 trillion, respectively, are Wall Street’s two most valuable companies.
Nvidia’s stock has now climbed 58 per cent in 2024, accounting for more than a quarter of the S&P 500’s increase year-to-date. That makes Nvidia’s outlook crucial not just for direct shareholders, but for owners of index funds widely held in retirement savings accounts.
AJ Bell investment director Russ Mould said: “The people who made the most money in the gold rush of the mid-1800s were the ones providing the tools to get the job done, not those hunting for the precious metal.
“Nvidia is effectively playing the same role today in this tech revolution.”
Soaring demand for Nvidia’s chips used by companies rushing to upgrade their AI offerings helped the Silicon Valley firm forecast a whopping 233 per cent growth in current-quarter revenue, above market expectations of a 208 per cent rise.
Other chipmakers exposed to AI also rallied, with Advanced Micro Devices jumping about 11 per cent and Broadcom adding 6.3 per cent. The Philadelphia chip index rallied 4.97 per cent to a record high in its biggest one-day gain since May 2023.
The S&P 500 surged 2.11 per cent to a record high, and the Nasdaq jumped nearly 3 per cent, leaving it just short of its first record-high close since November 2021.
Super Micro Computer, which sells AI-related server equipment, jumped more than 30 per cent, bringing its gain in 2024 to over 240 per cent.
Nvidia, which controls about 80 per cent of the high-end AI chip market, reported fourth-quarter revenue jump of more than threefold from a year ago to US$22.10 billion.
Some analysts, however, worried that US curbs on chips sales to China may be hurting its revenue growth. Sales in China amounted to about 9 per cent of Nvidia’s fourth-quarter sales, down from 22 per cent in the prior quarter.
Rapid increases in analysts’ financial estimates mean Nvidia’s forward earnings valuation has fallen, even after its stock more than tripled last year. Ahead of Nvidia’s report, it was valued at about 30 times expected earnings, down from 49 times a year before, according to LSEG data.
Still, many investors worry about the rapid pace of Nvidia’s gains.
“We’ve got well ahead of expectations and baked in a lot for the next three years,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest.
At least 17 brokerages raised their price targets after results. Among the most bullish, Rosenblatt Securities raised its price target to US$1,400 from US$1,100, implying a USD3.5 trillion stock market value.
UBS cut its price target to USD800 from USD850, reflecting “some potential slowing in revenue growth”.
S3 Partners managing director of predictive analytics Ihor Dusaniwsky said that short-sellers betting Nvidia’s stock would fall rushed to close those trades on Feb 22.
Short-sellers had lost more than USD2 billion on paper on Nvidia shares, taking their declines to more than USD6.8 billion so far in 2024, Dusaniwsky said. – Reuters
