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Written by Noel Landewicz and Medha Singh
(Reuters) – Nvidia added $277 billion to its stock market value on Thursday, after the leading chipmaker’s quarterly report beat expectations and reignited a stock rally fueled by optimism about artificial intelligence. This was the largest single-day gain on Wall Street in history.
The company’s stock price rose after its January quarter report released late Wednesday showed demand for the company’s specialized chips used in AI computing was stronger than analysts had already expected. The stock soared 16.4% to close at a record high of $785.38, giving it a market capitalization of $1.96 trillion. High expectations.
The Santa Clara, California-based company’s results provided new fuel to a global rally in AI-related technology stocks, pushing the S&P 500, Europe’s STOXX 600 and Japan’s Nikkei Stock Average to record highs.
Traders swapped $65 billion worth of Nvidia stock on Thursday, accounting for nearly a fifth of all trade in the S&P 500.
Nvidia’s one-day increase in stock market value is the largest in Wall Street history, recorded by Meta Platforms on February 2nd, after Facebook’s parent company announced its first dividend and reported strong financial results. That easily outpaced the $196 billion increase.
Nvidia’s increase in market value on Thursday exceeded Coca-Cola’s overall value of $265 billion.
The gains make Nvidia the third-most valuable company on the U.S. stock market, overtaking Amazon.com Inc. and Alphabet Inc., after competing with two tech giants in recent weeks.
Microsoft and Apple are two of the most valuable companies on Wall Street, with valuations of $3.06 trillion and $2.85 trillion, respectively.
Nvidia stock rose 58% in 2024, accounting for more than a quarter of the S&P 500’s year-to-date gain. That makes Nvidia’s outlook important not only to direct shareholders but also to owners of index funds, which are widely held in retirement savings accounts.
“The people who made the most money in the gold rush of the mid-1800s weren’t the people who were looking for precious metals, they were the people who provided the tools to get the job done,” said Russ Mold, investment director at AJ Bell. .
“NVIDIA is playing virtually the same role in this technology revolution today.”
The Silicon Valley company posted a staggering 233% revenue jump in the quarter, beating market expectations for a 208% rise, as demand for Nvidia chips used by companies rushing to upgrade their AI products soared. I predicted it.
Other chipmakers exposed to AI also rose, with Advanced Micro Devices up about 11% and Broadcom up 6.3%. Philadelphia’s tip index rose 4.97%, its biggest single-day increase since May 2023.
The S&P 500 rose 2.11% to a new all-time high, while the Nasdaq rose nearly 3%, closing just shy of its all-time high since November 2021.
Super microcomputers, which sell AI-related server equipment, have soared more than 30%, bringing the year-to-date increase to more than 240%.
Nvidia, which controls about 80% of the high-end AI chip market, reported that fourth-quarter revenue more than tripled from a year earlier to $22.1 billion.
But some analysts worry that U.S. curbs on semiconductor sales to China may be hurting sales growth. Sales in China accounted for about 9% of Nvidia’s fourth-quarter sales, down from his 22% in the previous quarter.
The rapid rise in analysts’ financial forecasts means that Nvidia’s future earnings assessment has declined, even though the stock price has more than tripled in the last year. Ahead of the release of Nvidia’s report, the company’s price-to-earnings ratio was about 30 times expected earnings, down from 49 times a year earlier, according to LSEG data.
Still, many investors are concerned about Nvidia’s rapid growth.
“We’ve far exceeded expectations and have a lot in store for the next three years,” said Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest.
At least 17 securities companies raised their price targets following the results. Rosenblatt Securities was the most bullish, raising its price target from $1,100 to $1,400, suggesting a market value of $3.5 trillion.
UBS lowered its price target from $850 to $800, reflecting “the possibility that earnings growth will slow slightly.”
Short sellers who bet on Nvidia’s stock to fall rushed to close those trades on Thursday, said Ihor Dusaniowski, managing director of predictive analytics at S3 Partners.
Dusaniowski said short sellers have lost more than $2 billion on paper, bringing their losses so far this year to more than $6.8 billion.
(Reporting by Noel Randewich in Oakland, California; Reporting by Medha Singh and Amruta Khandekar in Bengaluru; Editing by Arun Koyur and Matthew Lewis)
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