(Bloomberg) — Nvidia Corp. shares rallied back from last week’s selloff as some of the chip giant’s biggest clients are doubling down on artificial intelligence investments.
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The Santa Clara, California-based company’s stock jumped 15% this week, adding nearly $290 billion in market capitalization and posting its best weekly performance since last May. The surge comes after firms like Meta Platforms Inc., Alphabet Inc. and Microsoft Corp. pledged billions in AI investments.
“The future is AI,” said Paul Marino, chief revenue officer at GraniteShares. “And if the largest companies in the world are pouring tens of billions of dollars each into this, I think Nvidia has to be the big winner.”
The move is a sharp reversal from last Friday’s 10% plunge, the shares’ worst day in more than four years, which came amid fears that enthusiasm for chipmakers had run too far, too fast after Taiwan Semiconductor Manufacturing Co. scaled back its expansion outlook.
Nvidia currently dominates the lucrative market for accelerators that power data centers running complex computing tasks required for AI development. But the entire semiconductor industry is climbing, with the Philadelphia Stock Exchange Semiconductor Index, also known as the SOX, up 10% this week, compared with a 2.7% gain in the broader S&P 500 Index and a 4% jump in the tech-heavy Nasdaq 100 Index.
First-quarter reports “from key US hyperscalers – Google, Microsoft and Meta – suggest meaningful upside to CY24 capex, mostly driven by buildout of AI infrastructure,” Bank of America Corp. analysts lead by Vivek Arya wrote in a note to clients on April 25.
Meta shares were hammered on Thursday, tumbling 11%, after the Facebook-parent issued a disappointing quarterly revenue forecast and revealed that it will spend billions of dollars more than expected on AI this year. But Microsoft and Google-parent Alphabet were able to convince investors that spending on AI was already paying off.
Meanwhile, Amazon.com Inc., another big Nvidia customer, is slated to report first-quarter earnings on Tuesday.
“I hate to say things are a no-brainer,” Marino said. “But if you take a look at all the budget lines and all the capex spending, where is that going? It’s got to go to Nvidia, they have the best chips.”
—With assistance from Jeran Wittenstein.
(Updates with closing prices throughout.)
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