Nvidia Ignites $263 Billion AI Rally After Forecast Thrills

Nvidia Corp.’s forecast for surging revenue surprised even the most bullish analysts on Wall Street, propelling the chipmaker to the cusp of a $1 trillion market capitalization and igniting a global jump in stocks linked to artificial intelligence.

(Bloomberg) — Nvidia Corp.’s forecast for surging revenue surprised even the most bullish analysts on Wall Street, propelling the chipmaker to the cusp of a $1 trillion market capitalization and igniting a global jump in stocks linked to artificial intelligence.

The Santa Clara, California-based company gained as much as 25% in US premarket trading, on course for a record high, after saying it expects about $11 billion of sales in the three months ending July.

Nvidia, the biggest maker of the advanced chips required to train a new generation of AI services, inflamed already lofty expectations for a burgeoning technology. Rival chipmaker Advanced Micro Devices Inc. jumped 9%, while suppliers from Taiwan Semiconductor Manufacturing Co. to Advantest Corp. also climbed. Along with memory chipmaker SK Hynix Inc. and Europe’s ASML Holding NV, ASMI International NV, BE Semiconductor Industries NV, VAT Group AG and Soitec, they collectively added more than $260 billion of value in a market otherwise preoccupied with concerns about the US debt limit and China’s economic slowdown.

“We believe this is just the beginning of a paradigm-altering generative AI wave,” Barclays analyst Blayne Curtis wrote in a note. “So far, it seems that Nvidia is the one capturing nearly all the economics.”

Investors this year have doubled down on wagers that the viral success of OpenAI’s ChatGPT and other bots will usher in a new era of spending on the technology that underpins AI. Nvidia’s chips excel at parallel processing, making them well suited for training software by bombarding it with data.

Read more: Nvidia Soars After Flagging AI Demand, Eyes $1 Trillion Value

The market exuberance drove home growing anticipation around the advent of next-generation AI, which executives around the world have variously likened to the emergence of the internet and the iPhone. ChatGPT’s viral debut in November touched off a global race to develop similar services that can generate content — everything from poems to algorithms and pictures — with a few user prompts.

While the jury is out on which AI service will eventually end up on top, many investors are betting that a splurge on research will drive the companies that provide components essential to AI development and hosting.

TSMC, which manufactures Nvidia’s chips, rose as much as 3.8% in Taipei. Equipment supplier Advantest surged as much as 20% to an all-time high in Tokyo, while Hynix advanced up to 6.8% in Seoul. 

In Europe, semiconductor equipment maker ASML jumped 5%, while BE Semiconductor Industries gained 7.7%.

Under Chief Executive Officer and co-founder Jensen Huang, Nvidia has positioned itself as the top provider of components for training AI software. That’s helped it weather a broader slowdown in technology spending.

Investors were looking to the company for evidence that the surge in interest in AI this year is resulting in higher sales of chips that provide the computing power. The semiconductor maker delivered that with a revenue forecast for the current quarter that dwarfed the average analyst estimate.

“The transformational surge in AI spending is paying off much earlier than expected,” Morgan Stanley analyst Joseph Moore wrote in a note. “We simply have no historical precedent for the magnitude of this step function.”

Nvidia’s Huang argued that the use of the technology is only in its infancy and more tailored products for specific industries are needed. He’s built online services and software tools to help encourage the broader adoption of AI outside of his big customers — cloud providers like Microsoft Corp. and Amazon.com Inc.’s AWS.

Orders for Nvidia’s A100 and H100 AI chips are “truly spectacular,” said Amir Anvarzadeh, a strategist at Asymmetric Advisors Ltd. in Singapore. “More importantly for Asian equity investors, they point out that all the orders are being passed on to TSMC,” which has “more than adequate” capacity to fill the orders.

–With assistance from Winnie Hsu, Michael Msika and Kit Rees.

(Updates size of rally and adds US premarket trading, gains in European chipmakers, and analyst comment.)

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