Nvidia added US$277-billion (R5.3-trillion) in stock market value on Thursday, Wall Street’s largest one-day gain in history after the heavyweight chip maker’s quarterly report beat expectations and reignited a rally fuelled by optimism about artificial intelligence.

The company’s stock soared 16.4% to close at $785.38, a record-high close, lifting its market capitalisation to $1.96-trillion after its January-quarter report late on Wednesday showed demand for its specialised chips used in AI computing continued to outpace analysts’ already-high expectations.

The Santa Clara, California-based company’s results fed new fuel to a global rally in technology stocks linked to AI, propelling the S&P 500, Europe’s Stoxx 600 and Japan’s Nikkei share average to record highs.

Traders exchanged $65-billion worth of Nvidia’s shares on Thursday, accounting for almost a fifth all trading in S&P 500 stocks.

Nvidia’s one-day increase in stock market value was the largest in Wall Street’s history, easily beating a record $196-billion gain by Meta Platforms on 2 February after the Facebook parent declared its first dividend and posted robust results.

The rise in Nvidia’s market value on Thursday eclipsed the entire value of Coca-Cola, at $265-billion.

Its gain made Nvidia the US stock market’s third-most valuable company, pulling ahead of Amazon.com and Alphabet after jockeying with the two tech powerhouses in recent weeks.

Microsoft and Apple, valued at $3.06-trillion and $2.85-trillion, respectively, are Wall Street’s two most valuable companies.

Gold rush

Nvidia’s stock has now climbed 58% in 2024, accounting for more than a quarter of the S&P 500’s increase year-to-date. That makes Nvidia’s outlook crucial not just for direct shareholders, but for owners of index funds widely held in retirement savings accounts.

“The people who made the most money in the gold rush of the mid-1800s were the ones providing the tools to get the job done, not those hunting for the precious metal,” said Russ Mould, investment director at AJ Bell. “Nvidia is effectively playing the same role today in this tech revolution.”

Soaring demand for Nvidia’s chips used by companies rushing to upgrade their AI offerings helped the Silicon Valley firm forecast a whopping 233% growth in current-quarter revenue, above market expectations of a 208% rise.

Read: Nvidia shoots the lights out

Other chip makers exposed to AI also rallied, with AMD jumping about 11% and Broadcom adding 6.3%. The Philadelphia chip index rallied 4.97% to a record high in its biggest one-day gain since May 2023.

The S&P 500 surged 2.11% to a record high, and the Nasdaq jumped nearly 3%, leaving it just short of its first record-high close since November 2021.

Nvidia, which controls about 80% of the high-end AI chip market, reported fourth-quarter revenue jump of more than threefold from a year ago to $22.1-billion.

Some analysts, however, worried that US curbs on chips sales to China may be hurting its revenue growth. Sales in China amounted to about 9% of Nvidia’s fourth-quarter sales, down from 22% in the prior quarter.

Rapid increases in analysts’ financial estimates mean Nvidia’s forward earnings valuation has fallen, even after its stock more than tripled last year. Ahead of Nvidia’s report, it was valued at about 30x expected earnings, down from 49x a year before, according to LSEG data.

Still, many investors worry about the rapid pace of Nvidia’s gains. “We’ve got well ahead of expectations and baked in a lot for the next three years,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest.

Read: Vodacom turns to Nvidia AI to automate its towers

At least 17 brokerages raised their price targets after results. Among the most bullish, Rosenblatt Securities raised its price target to $1 400 from $1 100, implying a $3.5-trillion stock market value. UBS cut its price target to $800 from $850, reflecting “some potential slowing in revenue growth”. — Noel Randewich, Medha Singh and Amruta Khandekar, (c) 2024 Reuters