5 reasons why Nvidia’s stock has skyrocketed

Shares of Nvidia skyrocketed nearly 25% Thursday after the tech giant blew past earnings expectations late Wednesday. In just one day, the company’s market value jumped more than the total market cap of Qualcomm, Intel, and Texas Instruments. And it now sits on the cusp of joining the four businesses—Apple, Microsoft, Alphabet, and Amazon—that have market capitalizations of over $1 trillion.

Nvidia’s stock is beloved by Reddit’s r/wallstreetbets community and institutional investors. Regardless of whether you play the markets, it’s one that’s definitely worth keeping an eye on, as it could impact both your hobbies, your job, and other parts of your life in the years to come.

Nvidia is making itself the center of the AI world

The underlying reason for Thursday’s stock spike: artificial intelligence. Nvidia’s chips are at the heart of AI tools like ChatGPT, and it takes thousands of those to run a single AI system.

“It looks like the new gold rush is upon us, and Nvidia is selling all the picks and shovels,” Susquehanna Financial Group’s Christopher Rolland and Matt Myers wrote in a note to investors.

Traditional CPU chips can be used for AI, but they’re not the preferred way to build systems. Nvidia makes AI chips that are more efficient and much faster. The company also offers software to power deep learning.

“What they’ve done is not just a great job of building a chip, but building a software ecosystem around that chip,” said Wedbush analyst Matt Bryson on CNBC Thursday. “You build that software ecosystem . . . and it gets very, very hard to displace.”

Nvidia is a go-to for gamers

While AI is certainly driving investor excitement today, it’s foolish to discount the company’s consumer graphics division. Cards like the recently released GeForce RTX 4070 can run today’s video games at more than 1,000 frames per second. As gaming moves more and more to the cloud and away from consoles, that could give the company another source of potential revenue.  

Speaking of the cloud, it also oversees the GeForce Now streaming platform, which has earned a fair bit of praise.

Nvidia has a history of being in the right place at the right time

Before AI was the rage, Nvidia was a key player in the cryptocurrency world, as miners depended on its card to do the heavy lifting on token mining. That led to shortages in stores and unprecedented demand on the secondary market. Revenue from that division is now nominal, of course, but the company had pivoted to focus more on AI long before that became an issue.

Analysts say Nvidia has a long way to go

Year to date, Nvidia’s stock is up 165%. Over the past five years, it has soared 490%. But analysts say it still has a long way to go.

“Last night, Nvidia gave jaw-dropping robust guidance that will be heard around the world and shows the historical demand for AI happening now in the enterprise and consumer landscape,” Wedbush’s Dan Ives wrote in a note to investors. “For any investor calling this an AI bubble . . . we would point them to this Nvidia quarter and especially guidance which cements our bullish thesis around AI and speaks to the 4th Industrial Revolution now on the doorstep with AI.”

Evercore analyst C.J. Muse was a bit more succinct. “What can we say other than just WOW,” he wrote.

Nvidia is aiming to be just as influential in autonomous driving

AI is the focus right now, but Nvidia is also looking to position itself just as crucially in the world of self-driving cars. While Tesla has its own autonomous-driving system, Nvidia’s is the current odds-on favorite for most other manufacturers.

It has partnerships with Mercedes, where it will split the profits 50/50 on self-driving cars, and several manufacturers in China. And as with AI, it’s offering both hardware and software solutions, which could make it indispensable.