Why Wall Street’s obsession with a company you probably never heard of is sending stocks surging
By Allison Morrow and Krystal Hur, CNN
New York (CNN) — The stock market has boomed this year, and one big reason is a company without much name recognition — unless you’re a hard core video gamer.
Nvidia (NVDA) has surged 222% this year, including a 3% bump Thursday following super impressive earnings. Although it’s been known for graphics processors, Nvidia has now become almost synonymous with AI, after successfully diving head-first into the production of the type of microchip that powers the promising technology.
Demand has outpaced supply, making Nvidia the hottest of hot stocks: It’s leading the S&P 500 this year by a mile, and is now one of only a handful of companies with a market capitalization of more than $1 trillion.
Investor enthusiasm for AI has also helped boost other tech stocks. Meta is up 144% this year, and the tech-heavy Nasdaq has grown 31%. But Nvidia is by far the most sought-after AI stock. The American chipmaker produces the building blocks of generative artificial intelligence (think ChatGPT and the like).
The Santa Clara, California-based company posted year-over-year sales growth of 101% in the second quarter. Revenue went from $6.7 billion in the second quarter last year to $13.5 billion this year. The results were even stronger than the $11.2 billion in revenue that Wall Street analysts expected.
This is the second time in a row that Nvidia’s quarterly earnings have blown past expectations. Its success is beginning to provide assurances that the AI gold rush is not just a flash in the pan.
AI enthusiasm has helped power stocks into a bull market, even as the Federal Reserve has continued to hike interest rates in its battle against inflation.
“Nvidia’s hardware has become indispensable to the AI-driven economy,” Insider Intelligence senior analyst Jacob Bourne said in an email following the blockbuster earnings report. “The pressing question is whether Nvidia can consistently exceed the now-higher expectations.”
It shouldn’t have too much let-up: Demand for generative AI will remain robust over the next two years as apps for the new technology explode and become broadly deployed across companies, said Raj Joshi, senior vice president for Moody’s Investors Service, in a note to investors.
The-CNN-Wire
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