Nvidia earnings trigger AI stock rally - will the gains hold?
Justin Sullivan
As investing trends come in and out of fashion, it can be difficult to navigate what is real and will power the future, and what is hype and will eventually fade. Trading companies that are in the thick of the trends can also be tricky, especially when trying to recognize value ahead of the broader market and appraising how the given technology will play out. Others that are looking for a quick buck might want to jump on the train in any event, even if it's for a quick ride, though the short-term strategy can quickly leave a bag holder with a screen full of red at the end of a big run-up on a stock price.
Enter Nvidia: The company, a leader in artificial intelligence hardware and software, saw shares soar 24.6% to $380 in AH trading on Wednesday, bringing its YTD gain to over 160%. It came after the firm posted Q1 results that topped expectations and blew away forecasts for the upcoming period. "Demand [related to generative AI and large language models] has extended our data center visibility out a few quarters and we have procured substantially higher supply for the second half of the year," Nvidia (NASDAQ:NVDA) executives said on an earnings call. "The easiest way to think about that is over the next four or five, 10 years, most of that trillion dollars, and compensating adjusting for all the growth in data center still, it will be largely generative AI."
In fact, Nvidia (NVDA) is indicated to open on Thursday with a market-cap gain of more than $185B, making it worth more than Meta or Tesla, while it might even turn into the biggest single-day record (Apple rose by $191B in November 2022). Peers are riding the sentiment higher, such as rival chipmaker Advanced Micro Devices (NASDAQ:AMD) +8.5%, AI software maker C3.ai (NYSE:AI) +9.3% and Palantir (NYSE:PLTR) +7.7%. Bigger players like Microsoft (MSFT) and Alphabet (GOOG) (GOOGL), which are incorporating generative AI into their platforms, also rose about 2%, while the AI rally sent Nasdaq futures up 1.7% during the overnight.
But... the jury is still out on artificial intelligence. There's no doubt that companies are on the brink of something big, and that it will change many industries and how we do things, but it's important to separate hype from reality when talking about any emerging technology. Remember the Internet of Things? Web 3.0? The metaverse? DeFi, blockchain, and NFTs? Many shares related to companies operating in these spaces have seen their prices dwindle from the record highs seen when the news cycle was played up. Contrast that to smartphones, streaming, e-commerce and the cloud, which have had much more lasting impacts on business investment, the labor market and broader economy.
From the comments section: "[NVDA's] $6B rev and $2B in researching and development. That's how to build the future. Incredible stock," writes SA premium user ErikInvest, while chris hafferty adds "AI is as significant as the commercialization of electricity!" Raph86 counters that "from the COVID everything bubble right to the AI bubble... Market demands more of the sweet stuff!" in SA article, Nvidia Fiscal Q1 2024 Earnings: Solid Beat, But Hedge Your Bets. "The valuation does NOT have to be justified," replies Natturner1966. "It's the stock market, not a college finance class."
More on artificial intelligence

Google, European Commission to develop AI governing pact ahead of regulation
The White House is looking to develop a national AI strategy
13F filings: Stanley Druckenmiller's Duquesne and David Tepper's Appaloosa showed sizable positions in stocks benefiting from AI such as Nvidia