Nvidia hits 15% upper circuit as AI mania sparks tech rally on Wall Street, market value nears $2 trillion

Nvidia inched closer to $2 trillion market value after the bellwether for artificial intelligence (AI) chip demand once again exceeded Wall Street's sky-high expectations, re-igniting a global rally in tech stocks. The chipmaker returned as the third most valuable US company as its shares jumped 15 per cent to a record high of $780 on Thursday, after it forecast a roughly three-fold surge in first-quarter revenue on strong demand for its AI chips. 

If the gains hold, Nvidia will add about $230 billion to its market capitalization. That would be the biggest single-session increase in market value in history, eclipsing a $197 billion gain made by Meta at the start of the month.

Also Read: Up 50% in 2024, Nvidia stock fast approaches $2 trillion-mark after bulls tighten grip on AI-fueled rally

The chipmaker also gave guidance above expectations, driven by AI spending at its biggest customers, including Microsoft Corp. and Meta. The revenue in the current period will be about $24 billion, the company said in a statement on Wednesday. Analysts had predicted $21.9 billion on average, according to Bloomberg.

The benchmark S&P 500 index briefly hit a fresh record on Thursday after Nvidia's stellar results and forecast spurred the AI-led rally this year. Nvidia shares have jumped nearly 36 per cent this year to become the top performing S&P 500 stock, while playing a crucial part in the benchmark index climbing record highs in 2024.

Nvidia quarterly results

If Nvidia hits the $2 trillion mark, it would achieve the milestone at the fastest pace ever by adding $1 trillion in just about nine months. A series of estimate-beating results means the shares have been getting cheaper on a price-to-earnings basis.

 “Accelerated computing and generative AI have hit the tipping point,” Chief Executive Officer Jensen Huang said in the statement. Demand is surging worldwide across companies, industries and nations, according to Huang.

In the fiscal fourth quarter, which ended January 28, Nvidia’s revenue more than tripled to $22.1 billion. The profit excluding certain items was $5.16 a share. Analysts had predicted sales of about $20.4 billion and earnings of $4.60 per share. 

Also Read: World markets today: US stocks surge on robust Nvidia results, S&P 500 up 1.31%

Nvidia’s data center division, now by far its largest source of sales, generated $18.4 billion of revenue, up 409 per cent from the same period a year earlier. Gaming chips provided $2.87 billion of sales, according to Bloomberg.

On a conference call with analysts, Huang said that demand for Nvidia’s newest products will continue to outstrip supply for the rest of the year. Though supply is growing, demand isn’t showing any signs of slowing, he said.

“Generative AI has kicked off a whole new investment cycle,” Huang said. That will lead to a doubling of the world’s data center installed base over the next five years and “represent an annual market opportunity in the hundreds of billions,” he said.

The soaring demand for Nvidia's chips used by companies rushing to upgrade their AI offerings helped the Silicon Valley firm forecast a massive 233 per cent growth in first-quarter revenue, above market expectations of a 208 per cent rise.

Nvidia, co-founded by Huang in 1993, got its start as a provider of graphics cards for computer gamers. The company's profile blew up in the last two years, when its technology proved adept at handling heavy AI workloads.