Last Update: May 31, 2023, 01:11 AM IST
New York, United States (USA)
NVIDIA is taking advantage of AI to improve its chip designs. (Image: Reuters)
The stock’s value has tripled in less than eight months, reflecting a rise in interest in artificial intelligence.
Nvidia Corp joined an elite club of US companies with a $1 trillion market value on Tuesday as investors piled into the chipmaker, which has become one of the AI boom’s biggest winners.
The stock’s value has tripled in less than eight months, reflecting a surge in interest in artificial intelligence following rapid advances in generative AI, which can engage in human-like conversations and range from jokes to poetry. Everything can be prepared.
Nvidia is up roughly 240% since October, outpacing any other member of the broad-market S&P 500 index. The rally has pushed its valuation ahead of its peers, but some analysts say the AI boom means the stock should still be overpriced.
Its shares were up 5.7% on Tuesday. Only four other US companies currently have a valuation of more than $1 trillion – Apple Inc, Alphabet Inc, Microsoft Corp and Amazon.com Inc.
“We see Nvidia as the most important company on the planet in an era that is rapidly changing to one in which the emphasis will be on AI capabilities,” said Angelo Zino, analyst at CFRA Research.
The latest surge extends a rally from last week that was jump-started by a revenue forecast that beat the average Wall Street estimate by more than 50%, which some analysts described as “immeasurable” and “cosmic”. ” Said.
The highest price target values the company at about $1.6 trillion, roughly equal to Google-parent Alphabet.
According to Refinitiv data, Nvidia’s forward price-to-earnings multiple (P/E), a common benchmark for valuing stocks, is 47.49 — well above peers like Qualcomm and Intel and well above the sector median of 18.09. is above.
“While the company’s valuation looks lofty at the moment, we think Nvidia has significant earnings firepower as its AI GPU adoption is in its very early innings,” said Qinghai Chan, senior research analyst at Summit Insights Group.
GPU Chips
Big tech companies have focused on AI in hopes of attracting demand for the technology. The computers that power generative AI run on powerful chips called graphics processing units (GPUs) – 80% of which are produced by Nvidia, according to analysts.
The rapid success of OpenAI-owned ChatGPT has inspired tech giants like Alphabet and Microsoft to make the most of generative AI.
Nvidia, led by CEO Jensen Huang, has branched out into the data center market over the past few years after years as a powerhouse in videogame chips.
The company’s business expanded rapidly during the pandemic as gaming took off, cloud adoption increased and crypto enthusiasts turned to its chips for mining coins. Huang’s bet on AI is expected to fuel growth in the coming months.
Despite skyrocketing valuations, analysts believe there is room for growth in Nvidia’s AI chips business because generative AI technology is still in its infancy and is expected to see widespread adoption in the coming years.
In the last week alone, Nvidia shares soared nearly 25%, boosting AI-related stocks and boosting other chip makers. That helped the Philadelphia SE Semiconductor index close Friday at its highest level in a year.
“Tech traders and the AI frenzy have pushed Nvidia toward a $1 trillion cap and it’s not cheap,” said Argus Research analyst Jim Kelleher.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – reuters,
