Nvidia, the biggest public-listed company in the world, has seen its share price soar by more than 7 per cent in overnight trading after another enormous financial update.
The chipmaker, seen as a reference point for the wider artificial intelligence sector, already had a total company value of $5.08tn (£3.74tn) prior to Wednesday night’s earnings report.
But a renewed frenzy of buying its shares ahead of Thursday’s market opening will see that balloon by an extra $370bn (£272.5bn) in a single day, if the 7.3 per cent share price gain holds.
For context, that’s a bigger overnight gain than the entire market cap of the biggest firm in London’s FTSE 100, the international banking giant HSBC (£260bn).
Nvidia’s latest monster earnings showed quarterly revenue more than doubling year-on-year to $96.2bn, but it was more the future guidance of sales and continued high demand for their chips which drove the share purchases after hours. The share price is set to open at above $225, having closed on Wednesday at $209.66. In May, the stock hit an all time closing high at more than $235.
There has been some concern that Nvidia financing other companies, most of who are customers, around the AI sector was indicative of a “circular” economy being created, but CEO Jensen Huang proved able to calm some of those fears with his speech.
“For now, the company has proven that criticism of its investment and financing model for AI is overblown, and today’s results could give the whole AI trade, and the US stock market, a shot in the arm, after a volatile few months for the tech trade,” said Kathleen Brooks, research director XTB.
Ben Barringer, head of technology research at Quilter Cheviot, added that Mr Huang had indicated the pipeline for sales across more than the next year remained extremely high.
“Durability was another key question investors wanted answered and management's response was robust,” he said. “Alongside 70 per cent growth guidance, Nvidia highlighted roughly $2tn of backlog, suggesting demand remains exceptionally strong.
“Overall, this was a strong quarter, but more importantly a strong call. Investors arrived with a long list of worries and management provided reassuring answers to most of them. The stock was initially flat after the results but rose around 5 per cent following the call, suggesting that it was the commentary and strong guidance , rather than just the headline numbers, that ultimately convinced the market.”
However, Dan Coatsworth, head of markets at AJ Bell, cautioned that despite the pre-market rise, not everyone would be convinced over the long-term continued growth story within AI.
And, of course, when share prices rise so high, there remains more risk of a bigger fall, either through profit-taking or missed expectations.
“Nvidia has become the marmite company of the modern age. In one camp is a legion of supporters singing its praises about how it is at the forefront of the AI technology revolution. In the other camp are the cynics who say it is a bubble waiting to burst, pointing to circular finance activities that have nasty connotations with the dotcom boom and bust of the late 1990s and early 2000s,” Mr Coatsworth said.
“Nvidia has once again surpassed earnings expectations. It has now beaten revenue forecasts for 16 quarters in a row. The company is also generating an impressive figure of more than $1 billion a day in revenue.
“The company has been quick to shoot down any suggestions that its investments and financing deals are risky, saying demand is strong for the products.”
