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AI Stocks Soar as Nvidia Joins Trillion-Dollar Club


  • Tech stalwart Nvidia (NVDA) briefly joined the trillion-dollar-market-cap club earlier on Tuesday morning.
  • Last week, the company disclosed a blisteringly strong performance for its fiscal first quarter.
  • Artificial intelligence (AI) stocks are jumping on the normalization of AI.
Graphic of letters "AI" on green techy digital-display background with square pixels spelling out the letters, symbolizing artificial intelligence and AI stocks
Source: shutterstock.com/Victor Runov

Despite a soft opener in the equities market following Memorial Day weekend, technology stalwart Nvidia (NASDAQ:NVDA) is invigorating the underlying Nasdaq. As of this writing, shares are up about 3%. At one point today, shares were also up more than 7%, causing NVDA stock to exceed the trillion-dollar market capitalization milestone and sending artificial intelligence (AI) stocks running higher.

According to CNBC, NVDA stock needs to hold above $404.86 to stay in the rarefied $1 trillion club. At the moment, shares trade just below $403, which is the equivalent of a roughly $994 billion market cap.

Still, with Nvidia’s core graphics processing unit (GPU) as a main focus within the broader tech ecosystem, Wall Street analysts are reiterating their optimism for this high-flying stalwart. Let’s take a closer look.

Outstanding Nvidia Earnings Bolster Sentiment for AI Stocks

Nvidia’s outstanding results for the first quarter of fiscal 2024 initially catalyzed NVDA stock last week. Up front, Nvidia posted EPS of $1.09, handily beating the consensus EPS target of 92 cents. On the top line, the tech firm also rang up sales of $7.19 billion, again beating the consensus target of $6.52 billion.

Even better, management declared that it expected sales of approximately $11 billion in the current quarter, plus or minus 2%. As CNBC notes, that guidance exceeds the Street’s $7.15 billon estimate by more than 50%.

At the time, one of the segment highlights in the report centered on Nvidia’s data center group, which reported sales of $4.28 billion versus anticipated sales of $3.9 billion. Per CNBC:

“Nvidia said that performance was driven by demand for its GPU chips from cloud vendors as well as large consumer internet companies, which use Nvidia chips to train and deploy generative AI applications like OpenAI’s ChatGPT.”

According to CNBC, “Nvidia’s strong performance in data center shows that AI chips are becoming increasingly important for cloud providers and other companies that run large numbers of servers.” Thus, the normalization of digital intelligence is bolstering sentiment for AI stocks.

Winning the AI Race

While NVDA stock has commanded much of the spotlight lately, other AI stocks are also joining in on the fun. On Tuesday, shares of C3.ai (NYSE:AI) are up more than 25% as of this writing. Meanwhile, SoundHound (NASDAQ:SOUN) is gaining over 8% and Palantir (NYSE:PLTR) is currently up 9%. Enthusiasm over the broader deployment of AI seems to be enlivening this tech subsegment.

According to Grand View Research, the global AI market reached a $136.55 billion valuation in 2022. Experts project that, from 2023 to 2030, the sector will expand at a compound annual growth rate (CAGR) of 37.3%. By 2030, the AI ecosystem may command a value of $1.81 trillion. Obviously, that’s brilliant news for AI stocks.

Subsequently, enthusiasm rings particularly high for NVDA stock because of the underlying company’s sheer dominance. “There’s a war going on out there in AI, and Nvidia today is the only arms dealer out there. So as a result we’re seeing this huge jump in revenues,” said Raymond James Managing Director Srini Pajjuri recently.

In other words, fundamentally justified bullishness in NVDA is lifting the boats levered to artificial intelligence. As a result, AI stocks may represent true winners over the long haul.

Why It Matters

Despite broader uncertainties about the economy, analysts remain overall bullish on NVDA stock. According to TipRanks, analysts peg NVDA as a strong buy. This assessment breaks down to 32 “buy” ratings, four “hold” ratings and zero sells. The average price target for shares lands at $434.76, which still implies almost 9% upside potential.

On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

Article printed from InvestorPlace Media, https://investorplace.com/2023/05/ai-stocks-soar-as-nvidia-joins-trillion-dollar-club/.

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