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AI Boom Sparks $300 Billion Rally: Nvidia Leads the Charge in Market Value Surge

AI Boom Sparks $300 Billion Rally: Nvidia Leads the Charge in Market Value Surge

Published - May 25th, 2023 @ 10:15 AM (GMT+2 )

Nvidia increases production of its AI chips due to high demand, leading to a 28% rise

Following a strong surge in demand for artificial intelligence (AI) chips, Nvidia, the renowned chip manufacturer, is escalating its production efforts, leading to a 28% rise in its shares in after-hours trading. The surge in stock value resulted in a market capitalization increase of almost $300 billion, catapulting Nvidia's stock market worth to over $960 billion.

This uptick in Nvidia's shares also significantly boosted the shares of other AI-related companies, including tech giants like Microsoft (NASDAQ:MSFT) , Google (NASDAQ:GOOGL) , AMD (Advanced Micro Devices) (NASDAQ: AMD) , and AI specialists like C3.ai and Palantir Technologies. These stocks experienced a remarkable rise in the extended trade session on Wednesday, adding almost $300 billion to the market capitalization.

The rise in Nvidia's stock value is attributed to its robust first-quarter results and projections for the second quarter, which are over 50% more than Wall Street had estimated. The company's CEO, Jensen Huang, emphasized that Nvidia is "dramatically increasing our supply to match the surging demand" for its data center chips.

The increase in Nvidia's stock value, which peaked at $391.50 — its highest ever, further solidified its position as the world's most valuable chipmaker and the fifth-most valuable company on Wall Street. The excitement surrounding AI technologies and Nvidia's impressive results provide tangible evidence of the real potential of AI, according to Daniel Morgan, Senior Portfolio Manager at Synovus Trust in Atlanta, which holds Nvidia shares.

Other corporations linked to AI, including rival chipmaker AMD, saw a 10% jump in their shares. Similarly, Microsoft and Google's parent company, Alphabet, experienced about a 2% increase in their shares, as they hastened to integrate generative AI into their web search platforms. AI software companies C3.ai and Palantir Technologies also saw their shares rise by about 8%.

The interest in AI has grown exponentially this year, particularly after OpenAI's release of ChatGPT, which gained over a million users within its first week. The generative AI technology, which uses historical data to produce new content, including complete text, images, and software code, has significantly increased interest.

Prior to Nvidia's earnings report on Wednesday, the optimism surrounding AI had already spurred a 109% surge in its stock in 2023 alone, positioning the chip manufacturer as the top performer in the S&P 500 year-to-date. This rally brought Nvidia's trading to around 60 times the expected earnings, nearing its 2021 peak of 68 times the expected earnings, as per Refinitiv data.

To find more about Nvidia's Q1 revenue growth prospects click here:

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