Nvidia's forecast adds fuel to rally in AI tech stocks

(Reuters) – Nvidia’s quarterly revenue forecast exceeded expectations on Wednesday, causing a surge in the stock market and giving a boost to the U.S. stock market recovery. The news led to a 10% increase in Nvidia’s stock price after the bell, reaching a record high of $516. This spike in stock value increased the company’s market capitalization by $110 billion, bringing it to $1.27 trillion and solidifying its position as the world’s most valuable chipmaker. Nvidia’s strong performance can be attributed to the high demand for its high-end chips that power major artificial intelligence (AI) technology around the world.

Investors had been eagerly awaiting Nvidia’s report, hoping it would reinvigorate the sluggish U.S. stock market. The company’s shares have already tripled this year, playing a significant role in the tech-stock rally driven by optimism about AI’s potential. “Without Nvidia, the sustained tech market rally we’re seeing might not exist,” said Insider Intelligence senior analyst Jacob Bourne. The question now is whether Nvidia can consistently exceed the newly heightened expectations.

Nvidia’s strong forecast on Wednesday also had a positive impact on other AI-related stocks. Big Tech giants such as Microsoft and Meta Platforms saw their market values rise by over $70 billion, in addition to Nvidia’s increased value, as their shares climbed following the report. Microsoft and Alphabet, the parent company of Google, are actively incorporating generative AI into their web search platforms and other services. Consequently, both companies experienced a 2% increase in their stock values.

AI software maker C3.ai witnessed a 5.6% jump in its stock price, while Palantir Technologies, which recently launched its own AI platform, saw an increase of nearly 5%. Component makers involved in the AI sector also experienced a rally. Advanced Micro Devices and Broadcom each had a more than 3% increase, while Marvell Technology witnessed a 5% surge. Super Micro Computer had an impressive rally, with its stock price jumping over 8%.

Nvidia projected a third-quarter revenue of approximately $16 billion, with a margin of error of 2%. This forecast surpassed the average expectation of $12.61 billion from analysts polled by Refinitiv. The optimistic forecast further boosted investor sentiment and added to the overall optimism in the market.

Overall, Nvidia’s strong performance and optimistic forecast delivered on Wednesday had a significant impact on the stock market, particularly within the AI-related sector. The company’s success is expected to continue driving the tech market rally and shaping the future of the AI industry.

Reporting by Noel Randewich; Editing by David Gregorio