Who’s the winner of the AI gold rush? It’s not OpenAI, the startup that unleashed ChatGPT late last year and spurred companies spanning industries from technology to design to consulting to claim that they’re incorporating generative AI into their services.
It’s Nvidia, a Silicon Valley-based semiconductor company on track to join the $1 trillion club, which has only five members at the moment: Apple, Saudi Aramco, Microsoft, Alphabet, and Amazon.
By the end of the day (May 25), Nvidia’s shares soared 24% to $379.80, while the S&P 500 is up a mere 1%. Nvidia’s stock had its largest one-day percent increase since 2016. So far this year, the semiconductor’s stock is up 165%. Nvidia’s current market valuation is $939 billion.
Why is Nvidia’s stock surging?
The demand for Nvidia’s chips comes as the leading tech companies of the world are racing to apply generative AI into their services. Microsoft uses tens of thousands of Nivdia’s chips, called A100, to power ChatGPT. A single chip reportedly costs $10,000.
In addition to Microsoft, Nvidia counts Google and Meta—who are leading the AI boom—as customers. “[W]e have also procured a substantial amount of supply for the second half,” of the year, Colette Kress, CFO of Nvidia, said on a conference call with investors and analysts on May 24.
It’s a turnaround for Nvidia, where revenue, similar to other semiconductor companies, fell last year due to declining demand for gaming after a pandemic boom and crypto mining.
The company’s solid performance boosted its competitor Advanced Micro Devices’ stock by 11%. Meanwhile, Intel’s stock dropped 5%.