The biggest growth story on Wall Street. This is how chief strategist Frank Vranken of investment bank Edmond de Rothschild describes the trajectory that Nvidia has taken in recent years. That’s not an exaggeration. Two years ago the company was mainly known among technology specialists, now only five companies on earth are worth more. Nvidia has a market value of $1,720 billion. The company has already risen in value by 40 percent since January 1, while the Philadelphia Semiconductor Index, which includes major chip companies, rose by 6.7 percent.
The quarterly results that the company published on Wednesday evening were a make or break moment. The company ultimately lived up to expectations. It posted quarterly revenue of $22.10 billion, above the $20.50 billion in revenue expected by analysts. Good for 5.25 dollars in profit per share, also more than expected.
The question is whether investors will be satisfied with that. They had set the bar very high. After the close, the share shot up more than 6 percent. Options traders take into account that the company’s share price could move 10 percent in either direction on Thursday when the market opens. “That means that 175 billion dollars of value is created or destroyed,” Vranken calculates. Bank of America’s Vivek Arya described the mood as “a mix of fear and greed, fueled by the pursuit of all things artificial intelligence.”
It was already apparent on Tuesday that the nerves were on edge. Then the share had to fall 4.4 percent. The price reaction to the fresh quarterly results will follow on Thursday afternoon, when stock market trading resumes in New York.
“World leader in AI computing”
Because Nvidia has become such a leading company, the price movement will also reflect on other members of the so-called Magnificent seven, the seven largest American tech stocks. And possibly even in the broader US stock market. Goldman Sachs calls Nvidia “the most important stock on earth” for this reason. Of the analysts covering the stock, sixty have a buy rating, five recommend holding and only one thinks it is time to sell.
Nvidia was founded in 1993 by three engineers in a Silicon Valley diner. For a long time, the company was mainly active in the relatively limited niche of graphics chips. These are circuits that are very important in, for example, game consoles and graphic computer applications. But the properties of those graphics chips also turned out to be very suitable for applications involving artificial intelligence (AI). Nvidia now calls itself the “world leader in AI computing.” The company’s products are also used in self-driving cars, robots and for large-scale data processing, for example in the pharmaceutical sector.
Nvidia’s share price has increased tenfold in four years. Since the IPO in 1999, the share has increased in value by 58 times. The price explosion in recent years has a lot to do with the great expectations attributed to this new AI technology. Nvidia’s results are therefore seen as an indication of the commercial potential of artificial intelligence. Other large American tech companies, such as Microsoft, have also invested heavily in AI. Microsoft has an economic interest in OpenAI, the company behind the successful AI application ChatGPT.
