Nvidia Shares Soar 13%, Boost Market Value to a Record $330 Billion – Reuters

By Noel Randewich

Nvidia saw a remarkable increase of approximately $330 billion in its market value on Wednesday, marking the largest one-day gain ever recorded for a company on Wall Street. This surge was fueled by renewed enthusiasm for artificial intelligence (AI) following significant announcements from Microsoft and Advanced Micro Devices (AMD).

The stock of Nvidia rose nearly 13% as investors anticipated sustained high demand for its advanced processors, especially after Microsoft reported a substantial increase in its AI-related spending. Additionally, AMD boosted its 2024 sales forecast for AI chips, further supporting Nvidia’s stock.

However, Microsoft experienced a slight decline of 1.1% despite its positive announcements. Analyst Gil Luria from D.A. Davidson noted that while there was some slowing in Microsoft’s core cloud business, the increased capital expenditures signify a transfer of wealth from Microsoft to Nvidia’s shareholders.

Nvidia’s surge set a new benchmark on Wall Street, surpassing the previous record of a $277 billion increase that the company itself established on February 22. With its current valuation reaching $2.88 trillion, Nvidia stands as the third most valuable company in the market, trailing only Apple and Microsoft. The company previously achieved its highest valuation of $3.34 trillion on June 18.

The PHLX chip index also experienced a significant jump, climbing 7% in its largest single-day gain since 2022. This rise comes after a period of decline, which had seen the index drop 11% from its peak in early July due to concerns that the AI-driven rally had become overextended.

In its earnings report, Microsoft shared that revenue from its Intelligent Cloud division, which includes the Azure cloud platform, rose by 19% to $28.5 billion, although it fell short of analysts’ expectations. Analyst Kathleen Brooks from XTB highlighted that Microsoft’s increased capital expenditures—which surged by 78% to $19 billion in the quarter—are beneficial for Nvidia, as it represents a significant portion of demand for Nvidia’s premier AI chips. This expansion is needed to enhance Microsoft’s global data center network and address capacity shortages to meet growing AI demands.

The escalating costs associated with the AI race have raised concerns among investors, particularly following Alphabet’s announcement of higher-than-anticipated capital expenditures to support its generative AI initiatives. As technology companies enter the earnings season, there are high expectations, with analysts projecting an average growth of nearly 10% in their combined earnings.

AMD also made headlines by forecasting stronger-than-expected third-quarter revenue, driven by sustained demand for its AI chips, resulting in a more than 4% increase in its stock. Broadcom, another key player in the AI chip market, saw its shares rise by 12%.

Despite these positive developments in the AI sector, analysts like Rishi Jaluria from RBC Capital Markets caution that the prevailing macroeconomic environment remains challenging. The reality of AI’s potential is evident but continues to demand significant investment, which is reflected in the rising capital expenditure figures.