AI boom sends shares in US chip firm Nvidia soaring

The value of the US tech company Nvidia has soared by a quarter after it predicted a boom in demand for its computer chips to meet the needs of artificial intelligence products such as ChatGPT.

Nvidia’s share price rose by 25% in early trading on the back of the announcement, and gave it a market valuation of more than $940bn (£760bn) after stock markets opened on Wall Street yesterday, up from $755bn on Wednesday evening.

The share price had already more than doubled over the course of 2023, amid huge optimism over the rapid progress of generative AI products. These require massive datacentres full of semiconductor chips to operate. The hype was kicked off late last year after the startup OpenAI revealed ChatGPT, a chatbot capable of producing extraordinarily humanlike answers to users’ queries – albeit with problems around accuracy.

So rapid has the development of similar technology been in recent months – including realistic pictures, audio and video – that even AI experts are unclear about the potential capabilities and dangers of the technology.

Nvidia’s share price easily surpassed its previous all-time high of $333.76 from late 2021 when US markets opened yesterday. In early trading it reached $385.84 a share.

Companies across the economy are racing to show how they will incorporate AI into their existing businesses.

Some analysts warn that an AI tech bubble may be forming, while chip companies are also increasingly caught up in the geopolitics of the US and China amid tit-for-tat restrictions on semiconductor exports.

Nevertheless, the rush for AI has provided a huge boost to businesses such as Nvidia which provide the hardware needed to run complex models with billions of inputs.

Jensen Huang, the co-founder and chief executive of Nvidia, Huang said he expected his company to benefit from a huge shift in data centres towards more specialised chips made by his firm as companies raced “to apply generative AI into every product, service and business process”.

On Wednesday, Nvidia reported revenue of $7.2bn for the three months to the end of April, 10% above predictions from analysts. Yet it was the forecasts of huge future sales that fixated investors.

Nvidia forecast revenues of $11bn for the three months to the end of July – more than 50% higher than the $7.2bn predicted by Wall Street.