'New gold rush': Nvidia stock has been on a hot streak recently - Why?

The Nvidia headquarters on May 25, 2022 in Santa Clara, California.
The Nvidia headquarters on May 25, 2022 in Santa Clara, California.   -  Copyright  JUSTIN SULLIVAN/GETTY IMAGES NORTH AMERICA/AFP
By Euronews  with AP

The chip maker's stock has surged more than 20 per cent this week, lifting its market value close to $1 trillion as it rides the AI boom.

The market value of US tech firm Nvidia has jumped, as demand soars for its computer chips to meet the needs of artificial intelligence tools such as ChatGPT.

The company based in Santa Clara, California, is close to joining the exclusive club of $1 trillion (about €932 billion) companies like Alphabet, Apple and Microsoft after its shares jumped more than 24 per cent on Thursday.

The maker of graphics chips for gaming and artificial intelligence this week reported a quarterly profit of more than $2 billion (€1.8 billion) and revenue of $7 billion (€6.5 billion), both exceeding Wall Street expectations.

Yet its projections for sales of $11 billion (€10.2 billion) this quarter is what caught Wall Street off guard. It's a 64 per cent jump from last year during the same period, and well above the $7.2 billion (€6.7 billion) industry analysts were forecasting.

"It looks like the new gold rush is upon us, and NVIDIA is selling all the picks and shovels,” wrote Susquehanna Financial Group’s Christopher Rolland and Matt Myers.

Chipmakers around the globe were pulled along. Shares of Taiwan Semiconductor rose 3 per cent, while South Korea’s SK Hynix gained 6 per cent. ASML based in the Netherlands added 5 per cent.

Nvidia founder and CEO Jensen Huang said the world's data centres are in need of a makeover given the transformation that will come with AI technology.

AI chips are designed to perform artificial intelligence tasks faster and more efficiently. 

While general-purpose chips like CPUs can also be used for simpler AI tasks, they're “becoming less and less useful as AI advances,” a 2020 report from Georgetown University's Center for Security and Emerging Technology notes.

“Because of their unique features, AI chips are tens or even thousands of times faster and more efficient than CPUs for training and inference of AI algorithms,” the report adds, noting that AI chips can also be more cost-effective than CPUs due to their greater efficiency.

Analysts say Nvidia could be an early look at how AI may reshape the tech sector.

“Last night Nvidia gave jaw-dropping robust guidance that will be heard around the world and shows the historical demand for AI happening now in the enterprise and consumer landscape," Wedbush's Dan Ives wrote. 

"For any investor calling this an AI bubble ... we would point them to this Nvidia quarter and especially guidance which cements our bullish thesis around AI and speaks to the 4th Industrial Revolution now on the doorstep with AI”.

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