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Booming demand for microchips for AI pushes Nvidia shares up 25% — to a $1T valuation

Microchip maker Nvidia Corp. was poised to join an exclusive list of companies worth more than $1 trillion on Thursday as the company said that feverish demand for AI technology was causing booming demand for its products.

Stock gain makes chip maker the 5th-most valuable company in the U.S.

Jensen Huang, CEO of microchip maker NVidia, holds up one of the company's products.
Jensen Huang, president and chief executive officer of Nvidia Corp., says the company is boosting production of its products in the face of booming demand. (David Paul Morris/Bloomberg)

Microchip maker Nvidia Corp. was poised to join an exclusive list of companies worth more than $1 trillion on Thursday as the company said that feverish demand for AI technology was causing booming demand for its products.

The chip designer's shares — which have already doubled in value this year — jumped by another 25 per cent on Wall Street on Thursday after the company said it is seeing unprecedented demand in just about every facet of its business.

The company's shares were worth $305 apiece on Wednesday, enough to value the company at more than $750 million US. At one point on Thursday morning they topped $400, enough to value the company at more than $1 trillion US.

Prior to Thursday, only four American companies were in that exclusive club: Apple, Microsoft, Google parent Alphabet and Amazon. Meta and Tesla had previously achieved the feat, but both companies have fallen off dramatically since last year.

If the company manages to hold on to a market gain of at least $210 billion until the end of the day, it would mark the biggest one-day increase in value for a U.S. company ever.

And it's all happening because the company revealed late on Wednesday that it's on track to beat Wall Street forecasts for its revenue by at least 50 per cent. The company expects to book $11 billion in revenue this quarter, well above the $7 billion that analysts were anticipating.

CEO Jensen Huang said demand for chips is strong in its existing businesses, but also emerging in new ones tied to AI.

"A trillion dollars of installed global data centre infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process " Huang said.

"We are significantly increasing our supply to meet surging demand for them," he said.

Robert Schiffman, an analyst with Bloomberg Intelligence, said that chips for gaming were for a long time the company's biggest driver of demand, but that market has tailed off. Now the surge in demand for AI-related chips is causing the company's data centre business to boom.

All in all, the company is now on track to take in $35 billion US in revenue next year, which would be an all time record high.

Edward Moya, an analyst with Oanda, said Nvidia's stunning rise has made the company worth of being included in the list of tech giants that used to be known as FANG — Facebook, Apple, Netflix and Google.

"NVidia's AI boom is making it climb up the big tech ladder and is positioning itself to become a must-own stock for everyone," he said. "Everyone is pushing AI in the cloud and you will need Nvidia to do that."

Other analysts used breathless superlatives to describe the company's stunning outlook.

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

Dan Ives, a technology analyst with Wedbush, called the company's forecast a "game changer."

"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. For any investor calling this an AI bubble  we would point them to this Nvidia quarter and [how it] speaks to the 4th Industrial Revolution now on the doorstep."

ABOUT THE AUTHOR

Pete Evans

Senior Business Writer

Pete Evans is the senior business writer for CBCNews.ca. Prior to coming to the CBC, his work has appeared in the Globe & Mail, the Financial Post, the Toronto Star, and Canadian Business Magazine. Twitter: @p_evans Email: pete.evans@cbc.ca

With files from Reuters

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