News: Nvidia close to becoming first trillion-dollar chip firm after stellar forecast

Nvidia Corp witnessed a substantial surge of approximately 25% on Thursday, bringing its market value close to $1 trillion. This remarkable performance was driven by its impressive forecast, which revealed that Wall Street has yet to fully appreciate the transformative potential of AI spending. The stock's surge contributed to its already impressive year-to-date rise of over two-fold, propelling the chip designer's value by about $190 billion to nearly $945 billion. This puts Nvidia just below the record for the largest one-day value gain by a U.S. firm, a record currently held by Apple Inc.

Nvidia's positive earnings report also sparked a rally in the chip sector and AI-focused companies, causing stock markets in Japan and Europe to rise. In the U.S., notable companies like Alphabet Inc, Microsoft Corp, and AMD experienced stock increases ranging from 3% to 10%.

Financial analysts responded swiftly by revising their price targets for Nvidia stock, with 27 of them raising their views on the company. The consensus is that Nvidia is at the forefront of the AI industry, as its chips are used to power services like ChatGPT and similar applications. The mean price target for Nvidia stock has more than doubled this year. At the highest estimate, which is a $600 price target from Rosenblatt Securities and HSBC, Nvidia's value would exceed $1.48 trillion, surpassing that of Amazon.com Inc, currently the fourth-most valuable U.S. company.

Stacy Rasgon of Bernstein commented on Nvidia's second-quarter outlook, stating, "In the 15+ years we have been doing this job, we have never seen a guide like the one Nvidia just put up, which annihilated expectations and was by all accounts cosmological."

During the announcement, Nvidia projected quarterly revenue to be more than 50% above the average Wall Street estimate and expressed its plans to increase the supply of AI chips in the second half of the year to meet the rising demand. CEO Jensen Huang highlighted the need to replace $1 trillion worth of existing data center equipment with AI chips as generative AI becomes integrated into every product and service.

These impressive results indicate positive prospects for Big Tech companies that have shifted their focus to AI. They hope that AI technology will help drive demand at a time when their traditional profit drivers, such as digital advertising and cloud computing, are facing pressure due to a weak economy.

Dan Ives of Wedbush remarked, "This Nvidia (forecast) changes the whole narrative around AI and demand looking ahead in the enterprise. It may mark a historical inflection point in the AI Revolution, with Nvidia serving as the key barometer."