Nvidia’s shares surges 15% on Wall Street amid AI frenzy, nearing $2 trillion market value

Nvidia’s shares have surged 36% this year, making it the best-performing stock in the S&P 500 index, and contributing significantly to the index reaching record highs in 2024.

Nvidia approached a $2 trillion market value as its strong performance in AI chip demand surpassed Wall Street’s already high expectations, sparking a global surge in tech stocks. The company reclaimed its position as the third most valuable US firm as its shares soared 15% to a record $780 on Thursday. This surge came after Nvidia projected a nearly three-fold increase in first-quarter revenue due to robust demand for its AI chips.

Should the gains persist, Nvidia stands to increase its market capitalization by approximately $230 billion. This potential surge would mark the largest single-session increase in market value ever recorded, surpassing the $197 billion gain achieved by Meta earlier this month.

The chipmaker exceeded expectations and provided guidance driven by AI spending at major customers like Microsoft Corp. and Meta. Revenue for the current period is expected to reach approximately $24 billion, surpassing analysts’ average prediction of $21.9 billion, according to Bloomberg.

Nvidia’s market value surged by over $600 billion in 2024, reaching nearly $1.90 trillion, as per Bloomberg data. Prior to the earnings report, analysts at Goldman Sachs hailed Nvidia as “the most significant stock globally,” underscoring its control of over 80% of the AI chip market, a position expected to endure long-term

On Thursday, the S&P 500 index reached a new high briefly, fueled by Nvidia’s impressive performance and outlook, driving the AI-driven rally this year. Nvidia’s shares have surged by nearly 36% in 2024, making it the best-performing stock in the S&P 500 and contributing significantly to the index’s record-breaking ascent.

Nvidia’s quarterly financial performance

Should Nvidia reach the $2 trillion milestone, it would do so at a record pace, gaining $1 trillion in approximately nine months. With consistent results surpassing estimates, the shares have become more affordable based on price-to-earnings metrics.

In the statement, CEO Jensen Huang noted that accelerated computing and generative AI have reached a tipping point, driving high demand globally across various companies, industries, and countries.

In the fiscal fourth quarter ending January 28, Nvidia’s revenue surged, surpassing analyst expectations, with a triple increase to $22.1 billion. Excluding certain items, profit was reported at $5.16 per share, exceeding analysts’ predictions of approximately $20.4 billion in sales and earnings of $4.60 per share.

Nvidia’s data center division, now its largest revenue contributor, saw a significant increase with $18.4 billion in sales, up 409% from the previous year. Gaming chips also contributed $2.87 billion in sales, as reported by Bloomberg.

During a conference call with analysts, Huang noted that demand for Nvidia’s latest products will continue to surpass supply throughout the year. While supply is increasing, demand remains strong with no signs of slowing down.

Huang emphasized the significant impact of Generative AI, initiating a new investment cycle. He anticipates a doubling of the world’s data center installed base over the next five years, representing a substantial market opportunity annually in the hundreds of billions.

The surging demand for Nvidia’s chips, particularly for AI advancements, led the company to project a substantial 233% growth in first-quarter revenue, surpassing market expectations of a 208% rise.

Nvidia, founded by Huang in 1993, initially supplied graphics cards for computer gamers before gaining widespread recognition in the past two years for its ability to efficiently manage complex AI tasks.

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