Nvidia on the way to the trillion dollar mark

Nvidia Corp surged 24% on Thursday, one of the biggest one-day gains for a U.S. stock, after its impressive revenue forecast showed Wall Street has yet to adequately consider the breakthrough potential of AI.

That surge has more than doubled the value of the stock this year and boosted the chip designer's market capitalization by about $184 billion to nearly $939 billion.

That makes Nvidia twice the size of the second-largest chip company, Taiwan's TSMC. In the U.S., it trails only companies with a market valuation of $1 trillion such as Apple, <a class="tvreplink" target="_blank" href="https://www.tradingview.com/chart/?symbol=Nasdaq%3AGOOG">Alphabet, Microsoft and Amazon.

The positive earnings expectations also sparked a rally in the chip sector and AI-focused companies, boosting stock markets from Japan to Europe. In the U.S., big tech companies other than Amazon gained between 0.6% and 3.8%, while Advanced Micro Devices surged 11%.

Analysts hastily raised their price targets on Nvidia stock, with 27 of them expressing the view that all roads in the AI industry lead to Nvidia, as the company dominates the market for chips that power ChatGPT and similar services.

The average price target has more than doubled this year. At Elazar Advisors' highest price target of $644.80, Nvidia would be worth $1.59 trillion, similar to Alphabet.

"In the 15-plus years we've been doing this job, we've never seen a forecast like Nvidia's, which gave an outlook in the second quarter that was cosmological and crushed expectations," Bernstein's Stacy Rasgon said.

Nvidia, the fifth-most valuable U.S. company, on Wednesday forecast quarterly revenue that was more than 50% above the average Wall Street estimate and said it would deploy a larger quantity of AI chips in the second half of the year to meet rising demand.

CEO Jensen Huang said that $1 trillion worth of AI chips in data centers will need to be replaced with current equipment as generative AI is integrated into every product and service.

The findings are promising for big-tech companies focused on AI, hoping the technology will attract demand at a time when their digital advertising and cloud computing profit engines are under pressure from a weak economy.

Some analysts say Nvidia's results show that the boom in generative AI could be another big growth driver.

"We're really just seeing the tip of the iceberg. This could really be another inflection point in technological history, much like the internal combustion engine or the Internet," said Derren Nathan, head of equity research at Hargreaves Lansdown.