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Nvidia Results Strengthen The AI Boom And Increase Global Tech Shares

Nvidia Results Strengthen The AI Boom And Increase Global Tech Shares
After Nvidia anticipated quarterly sales that shattered expectations and announced a $25 billion buyback, the company's shares increased by 8.5% in premarket trade on Thursday, boosting tech equities globally.
The findings, which were announced late on Wednesday, were fueled by a surge in demand for its chips driven by artificial intelligence (AI), and they will strengthen the position of the first semiconductor company in the world with a trillion-dollar market worth.
In premarket trading, Nvidia's shares increased to $510.14, on pace to top the previous record high of $481.87 achieved earlier this week. This year, their value has tripled.
"Bears will be arguing that at some point, the valuation will start to appear full. Luckily for Nvidia, a cursory glance would suggest there aren’t many bears around,” said Hargreaves Lansdown analyst Sophie Lund-Yates.
According to Refinitiv data, more than 20 brokerages increased their target price on Nvidia following the reports, with Elazar Advisors being the most positive at $1,600.
The stock's worth would have increased by another thrice from its current level.
According to Refinitiv data, the only other target price above $1,000 is Rosenblatt Securities' estimate of $1,100, which is lower than the analysts' median price target of $600 for the company.
The growth of ChatGPT and other generative AI applications, almost all of which are driven by Nvidia's graphics processors, has mostly benefited Nvidia.
According to Refinitiv data, Nvidia currently trades at roughly 39 times the consensus earnings for the upcoming 12 months, down from an 80 forward price-to-earnings ratio in May when it forecasted a more than 50% revenue growth.
"Everyone has been looking for ways to play AI that aren't as expensive as Nvidia given the run this year. However, in our opinion NVDA itself remains the best way to accomplish that," said Bernstein analysts led by Stacy Rasgon.
"Given the magnitude of earnings revisions, we suspect the stock will still come out cheaper than it was going into the print."
The outcomes are also sustaining a surge on Wall Street, with futures tracking the tech-heavy Nasdaq 100 rising more than 1% and those tracking the S&P 500 up 0.7%.
Advance Micro Devices, a competitor of Nvidia, Micron Technology, Broadcom, and Marvell Technology, as well as other AI-related semiconductor companies, had premarket gains ranging from 2.8% to 5.4%.
Shares of Taiwan Semiconductor Manufacturing Co (TSMC), a supplier to Nvidia, increased 2.2% in other trading.
European chip manufacturers increased as well; Aixtron, BE Semiconductor, and ASM International all saw gains of around 2%. The tech index for Europe rose 1.1%.
"Nvidia news has a boosting effect on technology stocks, if only by confirming that all the talk around the AI-craze was not empty, after all," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
A lot depended on Nvidia's financial performance because the AI-driven boom in Nvidia and other Big Tech stocks has contributed to the majority of the S&P 500's nearly 15% year-to-date gains.
Nvidia's results, according to analyst Thomas Monteiro, confirmed "the narrative that has been propping tech stocks in general this year."

Christopher J. Mitchell

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