Nvidia moved closer to a $2 trillion market capitalization on Thursday after the bellwether for AI chip demand once again topped Wall Street's sky-high forecasts, sparking a renewed rally in global tech stocks.
The chipmaker returned as the third most valuable U.S. company as its shares jumped 12.5% to a record high of $760.71 on Thursday. If gains hold, Nvidia will add about $210 billion to its market capitalization.
Its shares have jumped nearly 36% this year to become the top performing S&P 500 stock, while playing a crucial part in the benchmark index climbing to record highs in 2024.
"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."
If Nvidia hits the $2 trillion mark, it would achieve the milestone at the fastest pace ever by adding $1 trillion in just about nine months.
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 first quarter revenue, above market expectations of a 208% rise.
Gains in Nvidia lifted aspiring AI competitor Advanced Micro Devices 6.5%, while Super Micro Computer surged 17% and Arm Holdings rose 11%. The Philadelphia chip index added nearly 4%.
The rally in chip stocks added 2% to the Nasdaq Composite, while sending European and Japan's Nikkei share average to record highs.
Nvidia, which controls about 80% of the high-end AI chip market, reported a fourth quarter revenue jump of more than threefold from a year ago to $22.10 billion.
Robust demand for its graphic processing units from massive data centers in the middle of an AI upgrade has been bolstering its revenue growth for three quarters.
Analysts, however, worried that U.S. curbs on chip 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.
The company trades at about 29 times its earnings expectations for the next 12 months compared to an industry median of 25.3, according to LSEG data. A year ago the valuation multiple was at 47.
Rapid increases in analysts' earnings estimates imply that its forward earnings valuation has fallen even as its share price rises further.
"We've gotten 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.
At least 17 brokerages raised their price targets after the results.
Rosenblatt Securities was the most bullish with a future price estimation of $1,200, which implies that Nvidia will hit $3 trillion market capitalization over the next 12 months.