Nvidia just added $200 billion to its market cap on AI hype - and the gold rush may just be getting started
The best thing about Friday is that we're only two days away from the next episode of Succession. Phil Rosen here, reporting from New York.
Before we start popping kernels for Sunday's finale, we have to talk about the hottest stock on the market that's cashing in its chips by the billions.
1. Nvidia had investors in a frenzy on Thursday. After posting stellar first-quarter earnings and giving investors hope for more to come with huge forward guidance, the stock was up as much as 24% as of this morning.
Among the biggest winners was the chip-maker's chief exec, Jensen Huang, who added nearly $7 billion to his net worth thanks to the blistering single-day rally (he owns 3.5% of the company).
The price spike added more than $200 billion to Nvidia's valuation, and put it near the rarefied air of the $1 trillion valuation club.
"The inflection in Generative AI development is here," Goldman Sachs analyst Toshiya Hari said. The bank raised its price target from $275 to $440, and shrugged off the threat of competitors in the space.
JPMorgan similarly doubled its price target for the stock to $500, and the firm expects massive demand for AI tech to balloon even more.
"There is not one better indicator around underlying AI demand going on in the hyperscale/cloud and overall enterprise market than the foundational Nvidia story," Wedbush's Dan Ives said Thursday.
"The Street," he continued, "was all awaiting last night's Nvidia quarter and guidance to gauge the magnitude of this AI demand story with many skeptics saying an AI bubble was forming and instead Jensen & Co. delivered guidance for the ages."
Huang brought Nvidia public in 1999, at the height of the dot-com bubble. At the time it had a valuation of $626 million, and the company was launching its first graphic processor unit for computers and video games.
It has since blossomed into a leader in the AI space — and the sector has become the hottest investor bet in 2023.
Even before the wild earnings report on Wednesday, analysts were calling Nvidia as the firm to beat. Their advantage, as Bank of America put it earlier this month, is that they're selling picks and shovels to everyone getting in on the gold rush. In other words, their tech is the underlying foundation of the rest of the AI boom.
Here's Ives again:
"In 22 years of covering tech stocks and large cap we have NEVER seen a guidance range of this magnitude on a large cap tech name and thus speaks to our thesis that the monetization of AI... is well underway."
Do you own any Nvidia stock? When did you first buy it? Tweet me (@philrosenn) or email me (firstname.lastname@example.org) to let me know.
In other news:
2. US stock futures fall early Friday, as investors continue to await progress on debt ceiling talks. Data on personal income, consumer spending and sentiment, and durable goods is also due this morning. Check out the latest market moves.
3. Earnings on deck: Lowe's, Glencore, and more, all reporting.
4. Jeremy Grantham's GMO said high valuations means US stocks are doomed for years of dismal returns. One of the firm's top analysts said he's still "highly skeptical" of the current pricing of equity markets. Here are three places where GMO recommends parking your cash for the current environment.
5. The S&P 500 is already flashing recession signs. That's according to economist David Rosenberg, who pointed out that stocks closely linked to the real economy have tanked. As he put it: "The most economic sensitive areas are down -33%: transports, consumer discretionary and banks. Behaving as they did heading into the 1990-91, 2001 and 2007-09 downturns."
6. Iran pushed for de-dollarization in a meeting with 11 other countries. Officials said the move away from the dollar is "not a voluntary choice" anymore. It marks the latest in a string of recent pivots by other nations away from the greenback.
7. Strong corporate earnings have helped the US avoid a recession so far. But Bank of America strategists cautioned that markets and the economy are still staring down two big risks. Get the full details.
8. Warren Buffett's businesses are in the throes of an economic downturn and a major transition period. Five CEOs broke down the value of Berkshire's ownership — and offered fresh insights into a possible successor to the legendary investor.
9. The chief investment strategist at Citi Global Wealth laid out the best opportunities in tech stocks. Investors that have chased the AI gold rush haven't fully capitalized on certain corners of the market. These three bets look poised for more upside.
10. We're entering a brutal era for housing. Experts, real estate agents, and Americans are all concerned about the ice age hitting the sensitive property market. One trend that seems to have cemented itself: If you don't already own a home, you're going to be screwed for years to come.
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