NVIDIA (NVDA) Shares rose in early trading Wednesday, pushing their market capitalization to within striking distance of the $2 trillion mark, as investors continue to review sales and profit growth forecasts for the largest ai chip maker. of the world.
Nvidia has been the most prominent player in the market this year, regardless of the sector, adding more than $560 billion, almost the entire value of Tesla. (TSLA) – to its market capitalization and increasing just under 50% since the end of December.
A surge in investment in artificial intelligence, particularly by so-called hyperscalers, or large cloud computing service providers, has accelerated interest in Nvidia, given its dominant position in the market for chips that power computing technologies. artificial intelligence.
Google main alphabet (GOOG) told investors last month that “investment (capex) will be markedly higher” this year than last, and reports suggest up to $50 billion could be allocated to ai and cloud initiatives.
Giant social media meta-platforms (GOAL) Meanwhile, it plans to have around 350,000 H100 graphics processing units, the ai-focused chips that Nvidia makes, by the end of the year. That would bring Meta's Nvidia GPU total to around 600,000, a level that would establish it as one of the largest ai systems in the world.
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In fact, Morgan Stanley analysts predict that cloud capital spending growth will increase 26% this year from 2023 levels, marking the largest increase for the so-called Big Four (Amazon, Google, Microsoft and Meta Platforms) since 2018.
Nvidia sells the axes and shovels of the ai gold rush
“It all comes down to use cases, and while (Microsoft's) Azure is the foundation of the cloud platform for ai with (CEO Satya Nadella) at the helm, we also expect Google's cloud platforms (GCP) and Amazon (AWS) will see massive growth tailwinds from this unprecedented increase in ai deployments over the next 12 to 18 months,” says Wedbush analyst Dan Ives.
And just as pick-and-shovel salesmen were the biggest beneficiaries of the California gold rush nearly two centuries ago, Nvidia is expected to take advantage of the new Gold Coast ai rush in the coming years.
Nvidia, Ives said, remains “the only game out there from an ai chip perspective.”
That's probably why the stock, which outperformed Amazon (AMZN) last night in market value for the first time in two decades, it could overtake another hyperscaler rival, Google, later in the session.
Alphabet shares are valued at $1.81 trillion, the third highest in terms of US stocks, just ahead of Nvidia's $1.78 trillion.
However, if the group's shares falter in the coming days, Nvidia will still have another chance to overtake Google when it releases its fourth-quarter earnings after the close of trading on February 21.
Analysts expect Nvidia's revenue to more than double from 2022 levels to more than $20.3 billion, with profit margins expanding around 9 percentage points to a staggering 75.4%.
Nvidia: really good, with possibilities for greatness
UBS analyst Timothy Arcuri, who earlier this week raised his price target for Nvidia from $70 to $850, says revenue from the group's data center, where ai chips are reported, could beat forecasts of Wall Street by up to 3 billion dollars.
“Discussions with customers about Nvidia's delivery times have increased substantially in recent months, which means there are still shipping slots available” heading into the second half of this year, Arcuri said.
“Normally this is a bad thing, but demand for ai computing power remains so strong that in the near term, we think this just points to significant upside potential for shipments and revenue,” he added.
Related: Nvidia Stock Key to Nasdaq Hitting New Record
Last week's stronger-than-expected fourth-quarter update from Arm Holdings, the chipmaker that listed on the Nasdaq last fall, has also contributed to the bullish tone of Nvidia's highly anticipated earnings.
Arm Holdings, which designs chip manufacturing blueprints and derives most of its revenue from royalty payments, also sells semiconductors that support Nvidia's ai-focused data center chips.
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The Cambridge, UK-based group said fiscal 2024 revenue would grow 19% to around $3.1 billion with a big jump in earnings, which it forecast will rise to $1.22 a share.
Nvidia was one of Arm's biggest financial backers ahead of September's initial public offering and attempted to buy the group in 2022. That effort was thwarted by UK regulators, who feared the $40 billion deal would stifle the competition.
Nvidia shares rose 1.5% in premarket trading, indicating an opening price of $732.11. Such a move would increase its market value to around $1.807 trillion.
Meanwhile, Google shares will rise about 0.67% to $146.11 each, putting its market capitalization at $1.822 trillion.
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