Nvidia's forecast sparks $260B rally in AI stocks

Nvidia Corp.'s forecast for surging revenue surprised even the most bullish analysts on Wall Street, propelling the chipmaker to the cusp of a US$1 trillion market capitalization and igniting a global jump in stocks linked to artificial intelligence.

The Santa Clara, California-based company gained as much as 29 per cent in premarket trading, on course for a record high, after saying it expects about US$11 billion of sales in the three months ending July. Analysts had estimated that figure was going to be roughly US$7.2 billion. The stock was trading up 24 per cent after the bell.

Nvidia, the biggest maker of the advanced chips required to train a new generation of AI services, added to expectations for a burgeoning technology. Rival chipmaker Advanced Micro Devices Inc. jumped 10 per cent, while suppliers from Taiwan Semiconductor Manufacturing Co. to Advantest Corp. also climbed. Along with memory chipmaker SK Hynix Inc. and Europe's ASML Holding NV, ASM International NV, BE Semiconductor Industries NV, VAT Group AG and Soitec, they collectively added more than US$260 billion of value in a market otherwise preoccupied with concerns about the U.S. debt limit and China's economic slowdown.

“We believe this is just the beginning of a paradigm-altering generative AI wave,” Barclays analyst Blayne Curtis wrote in a note. “So far, it seems that Nvidia is the one capturing nearly all the economics.”

Investors this year have doubled down on wagers that the viral success of Openai's CHATGPT and other bots will usher in a new era of spending on the technology that underpins AI. Nvidia's chips excel at parallel processing, making them well suited for training software by bombarding it with data.

The market exuberance drove home growing anticipation around the advent of next-generation AI, which executives around the world have variously likened to the emergence of the internet and the iphone.

Chatgpt's viral debut in November touched off a global race to develop similar services that can generate content — everything from poems to algorithms and pictures — with a few user prompts.

While the jury is out on which AI service will eventually end up on top, many investors are betting that a splurge on research will drive the companies that provide components essential to AI development and hosting.