Chip Maker Nvidia Shares Soar 14% As Imaginations For AI Future Run Wild

Topline

Nvidia stock skyrocketed Thursday after the Silicon Valley chipmaker smashed on earnings and boasted about its ability to cash in on the artificial intelligence craze, but one analyst says Nvidia’s $70 billion single-day gain is unwarranted.

Nvidia CEO Jen-Hsun Huang got $3 billion richer Thursday.

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Key Facts

Nvidia posted $6.1 billion in sales and $0.88 in profit per share over the last three months of 2022, each beating analyst expectations, and projecting it will beat sales estimates for the current quarter.

But perhaps more important for investors was Nvidia leadership’s focus on its AI business, with CEO Jensen Huang declaring in the Wednesday earnings call his company will be “the best AI salespeople [in]

the world” for cloud computing and bragging about Nvidia’s capabilities in generative AI, the technology made viral by OpenAI’s ChatGPT program.

Nvidia shares surged 14% to $237 as of 2 p.m. EST, its highest level since April 2022.

Investors can now “dream the dream” about Nvidia’s long-term growth potential, Bernstein strategists led by Stacy Rasgon wrote in a Thursday note, upgrading its price target for Nvidia from $200 to $265, implying more than 10% further upside.

Big Number

80%. That’s the proportion of chips used for AI processors like ChatGPT that Nvidia makes, according to a survey of the market in 2020 by technology research firm Omdia. It’s unclear if ChatGPT uses Nvidia technology, though it’s highly likely given Nvidia’s market dominance.

Contra

Nvidia’s current valuation “largely reflects” the “open-ended growth opportunities” presented by AI, Deutsche Bank analyst Ross Seymore wrote to clients, setting a $200 price target for the stock.

Key Background

Nvidia is the largest chipmaker in the world by market cap, with a valuation of nearly $600 billion. Though the entire industry has boomed in recent years given its importance in advanced computing, Nvidia has been a Wall Street favorite given its robust AI business and as U.S. policies favor domestic chip producers. Shares of the California-based technology giant are up 65% year-to-date, placing it among 2023’s top-performing stocks listed on the S&P 500, though Nvidia is still down nearly 30%from its November 2021 peak. Long reliant on revenue from its video game chip business, Nvidia has increasingly relied on its data center segment for revenue, with its data component bringing in twice as much sales as its gaming division in 2023.

Forbes Valuation

Huang’s net worth surged by almost $3 billion Thursday thanks to the stock surge. The Nvidia cofounder’s $22 billion fortune is the 69th-largest in the world, according to Forbes’ estimates.