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Demand for NVIDIA chips propels record £218bn stock surge

Written by Mon 26 Feb 2024

Image Credit: Reuters

Chipmaker NVIDIA saw an unprecedented £218 billion ($277 billion) surge in its stock value in a single day, setting a new Wall Street record. 

The surge was driven by NVIDIA’s quarterly report, which surpassed expectations amid artificial intelligence (AI) excitement. NVIDIA’s stock rose 16.4% to close at £619.23 ($785.38), raising its market capitalisation to £1.54 trillion ($1.96 trillion). 

On Thursday, traders exchanged £51.2 billion ($65 billion) of NVIDIA shares, representing around a fifth of all S&P 500 stock trading.

NVIDIA’s surge propelled it to become the third most valuable company in the US stock market, surpassing Amazon and Alphabet. Microsoft and Apple remain the top two most valuable companies on Wall Street, with market values of £2.4 trillion ($3.06 trillion) and £2.24 trillion ($2.85 trillion), respectively.

NVIDIA’s stock has risen 58% in 2024, contributing over a quarter of the S&P 500’s year-to-date gains. High demand for NVIDIA chips led the Silicon Valley firm to project a 233% growth in current-quarter revenue, surpassing market expectations of a 208% increase.

NVIDIA, controlling approximately 80% of the high-end AI chip market, reported a Q4 revenue increase of over threefold from the previous year, amounting to £17.4 billion ($22.1 billion).

Concerns for NVIDIA’s Future

Reuters reported some analysts are concerned that restrictions imposed by the United States on chip sales to China might negatively impact NVIDIA’s revenue growth. Sales in China accounted for about 9% of Nvidia’s Q4 sales, down from 22% in the previous quarter.

Despite NVIDIA’s stock price more than tripling last year, rapid increases in analysts’ financial estimates have led to a decrease in NVIDIA’s forward earnings valuation. 

Before NVIDIA’s report, its valuation stood at approximately 30 times expected earnings, down from 49 times the previous year, according to data from the London Stock Exchange. Despite these positive trends, many investors remain cautious about the speed of NVIDIA’s stock gains, expressing concerns about its sustainability.

NVIDIA Versus Other Chipmakers

The positive results reported by NVIDIA contributed to a broader surge in technology stocks worldwide, particularly those associated with AI.

This surge propelled stock market indices like the S&P 500, Europe’s STOXX 600, and Japan’s Nikkei share average to reach record highs. The Philadelphia chip index surged 4.97% to a record high, marking its largest one-day gain since May 2023.

Other chipmakers also experienced significant gains. 

Advanced Micro Devices rose about 11%, and Broadcom added 6.3%. AI-related server equipment company, Super Micro Computer, increased over 30%, bringing its year-to-date gain to over 240%. 

Last week, the CEO of SoftBank Group, Masayoshi Son, said he was seeking to raise up to £79.2 billion ($100 billion) for a chip venture to rival NVIDIA. The Japanese investment company’s new project will supply semiconductors essential for artificial intelligence (AI). 

Son aims to enhance the chip design capabilities of British semiconductor firm, Arm Holding, whilst cultivating it as an AI chip powerhouse. SoftBank currently holds around 90% of Arm and acquired the semiconductor company in 2016 for £25.3 billion ($32 billion).

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Written by Mon 26 Feb 2024

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