Nvidia jumps 16% and gains US$260 billion in market value – 02/22/2024 – Market

Nvidia’s annual balance released this Wednesday (21) exceeded market expectations and led to a strong rise in markets around the world this Thursday (22), boosting technology companies and taking indices in the United States, Europe and Japan to historic highs.

The chipmaker’s shares soared 16.4% to $785.38, a jump that added nearly $260 billion in market value to the company. In the year, earnings exceed US$700 billion.

The rise means that Nvidia has once again surpassed Amazon and Google’s holding company, Alphabet, and has become the third most valuable company in the US, behind only Microsoft and Apple.

Nvidia has grown so much and has such a high weight in the S&P 500 that a significant jump like this Thursday automatically boosts the entire market.

This growth has also helped revive investor enthusiasm for the potential of artificial intelligence (AI). Nvidia Chief Executive Jensen Huang said “demand is increasing around the world” as generative AI reaches “a tipping point.”

The S&P 500, Wall Street’s benchmark index, closed up 2.1%, marking its biggest daily gain since January 2023 and surpassing last week’s record high. The tech-heavy Nasdaq Composite rose nearly 3%, ending its best day in more than a year and hitting its own record. The Dow Jones still closed above 39 thousand points for the first time.

The exuberant reaction to Nvidia’s earnings spread to other markets, with the Stoxx Europe 600, Japan’s Nikkei 225 and the FTSE All-World index also hitting record highs.

An earlier report from Nvidia, released in May last year, was a key factor in kickstarting investor enthusiasm about AI.

Vishal Vivek, a strategist at Citi, said that until late last year “there were some concerns about [esse] enthusiasm diminish. What this shows is that the topic of AI is alive and well. That’s what the market will consider as an important conclusion.”

The market impact of Nvidia, directly responsible for more than a quarter of the S&P’s growth year to date, has become so large that some investors and analysts were anticipating Wednesday’s financial report as a risk to the market alike. than the release of inflation data.

Citi analysis previously showed that traders in options markets were treating Thursday’s trading session as the biggest “risk-on event” ahead of next month’s Federal Reserve meeting.

Charlie McElligott, head of cross-asset strategy at Nomura, said Nvidia’s “halo effect has almost single-handedly propped up” the US stock market in recent months.

The company’s results overshadowed the release of minutes from the Fed’s latest meeting on Wednesday, which reaffirmed that officials were cautious in January about cutting rates too quickly.

The recent market rally has raised concerns in some quarters about excessive exuberance, especially given that economic growth is expected to slow next year and U.S. inflation has shown signs of returning.

Nvidia’s revenue forecasts have risen so quickly that its valuation is not at historically high levels when looked at against the future price-to-earnings ratio. However, a number of investors and analysts have warned that some stocks and indices are approaching “bubble” territory.

Two investors highlighted the rise of Nasdaq-listed server maker Super Micro Computer, whose share price has risen 225% so far this year on the back of enthusiasm for AI.

Ted Mortonson, technology strategist at Baird, said: “There is a disconnect between valuation versus fundamentals [em algumas áreas]. This happened in 2000. The market could very well be renamed from Nasdaq to DraftKings — it’s a trading casino.”