(Bloomberg) — Shares of Nvidia Corp. are recovering from last week's sell-off, as some of the chip giant's biggest customers double down on their investments in artificial intelligence.
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Shares of the Santa Clara, California-based company rose 15% this week, adding nearly $290 billion in market capitalization and posting its best weekly performance since last May. The increase comes after companies like Meta Platforms Inc., Alphabet Inc. and Microsoft Corp. have committed billions in AI investments.
“The future is AI,” said Paul Marino, Chief Revenue Officer at GraniteShares. “And if the biggest companies in the world each put tens of billions of dollars into this, I think Nvidia should be the big winner.”
The move marks a sharp reversal from last Friday's 10% decline, the stock's worst day in more than four years, which came amid concerns that enthusiasm for chipmakers had run too far, too fast after Taiwan Semiconductor Manufacturing Co. had scaled back its expansion prospects. .
Nvidia currently dominates the lucrative market for accelerators that power data centers that perform complex computing tasks required for AI development. But the entire semiconductor industry is on the rise, 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 jump of 4% in the technology-heavy sector. Nasdaq 100 Index.
First-quarter reports “from the top U.S. hyperscalers – Google, Microsoft and Meta – suggest meaningful upside for CY24 investment, driven primarily by AI infrastructure buildout,” Bank of America Corp. analysts wrote. led by Vivek Arya in a note to clients on April 25.
Meta shares slumped on Thursday, plunging 11%, after the Facebook parent company released a disappointing quarterly revenue forecast and revealed it will spend billions of dollars more than expected on AI this year. But Microsoft and Google parent company Alphabet convinced investors that spending on AI was already paying off.
Meanwhile, Amazon.com Inc., another major Nvidia customer, will report first-quarter results on Tuesday.
“I hate to say things are a no-brainer,” Marino said. “But when you look at all the budget lines and all the capital expenditure, where is that going? It should go to Nvidia, they have the best chips.”
—With help from Jeran Wittenstein.
(Updates with closing prices everywhere.)
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