The chip supplier is set to reclaim its spot as the third most valuable U.S. company as shares surged 13.5% before the bell on Thursday. If gains hold, Nvidia will add more than $230 billion to its market capitalization.
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Its shares have jumped nearly 36% 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.
“The people who made the most money in the gold rush of the mid-1800s were the ones providing the tools to get the job done, not those hunting for the precious metal,” said Russ Mould, investment director at AJ Bell.
“Nvidia is effectively playing the same role today in this tech revolution.”
Soaring demand for Nvidia’s chips used by companies rushing to upgrade their AI offerings helped the Silicon Valley firm forecast a whopping 233% growth in first-quarter revenue, above market expectations of a 208% rise.
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Gains in Nvidia lifted aspiring AI competitor Advanced Micro Devices 6%, while Super Micro Computer climbed 14.2% and Arm Holdings rose 9.9%. The iShares semiconductor ETF added 4%. The premarket rally in chip stocks added 2% to Nasdaq 100 futures on Thursday, while Japan’s Nikkei share average surged to a record high, eclipsing the 1989 bubble-era peak.
At $766, shares of Nvidia were on track to hit a record high at the market open after its fourth-quarter revenue jumped threefold from a year ago to $22.10 billion.
Robust demand for Nvidia’s graphic processing units from massive datacenters in the middle of an AI upgrade has been bolstering its revenue growth for three quarters.
Analysts, however, worried that U.S. curbs on chips sales to China may be hurting its revenue growth. Sales in China amounted to about 9% of Nvidia’s fourth-quarter sales, down from 22% in the prior quarter.
“There is no doubt that demand for Nvidia’s products remains strong.. but investors are well aware that future beats will become more and more challenging,” said Michael O’Rourke, chief market strategist at JonesTrading.
The company trades at about 29 times its earnings expectations for the next 12 months compared to an industry median of 25.3, according to LSEG data. A year ago the valuation multiple was at 47.
Rapid increases in analysts’ earnings estimates imply that its forward earnings valuation has fallen even as its share price rises further.
