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Nvidia Earnings Outlook for Current Quarter Induces AI Rally as Company Boosts Production

The latest earnings outlook of Nvidia Corporation (NASDAQ: NVDA) has triggered a substantial rally in artificial intelligence (AI) stocks. Early Thursday, the chip maker’s stock soared, pulling other AI-exposed companies higher on a better-than-expected sales forecast. Nvidia’s bullish sales forecast originated from surging demand for its AI chips, which has also seen the company boost production.

Weighing in on increased production, Nvidia chief executive officer Jensen Huang explained in a statement:

“The computer industry is going through two simultaneous transitions – accelerated computing and generative AI. Our entire data center family of products – H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand, and BlueField-3 DPU – is in production. We are significantly increasing our supply to meet surging demand for them.”

Nvidia Projected Earnings See AI Stocks Rally to Combined $300 Billion in Market Value Since Wednesday

Since yesterday’s extended trading session, AI stocks have increased by a combined $300 billion in market capitalization from the Nvidia development. Furthermore, KeyBanc Capital Markets analysts described Nvidia’s earnings outlook as “[living] up to the generative hype.” The analysts increased their NVDA price target from $375 to $500, adding that the semiconductor player is in prime position to benefit from “AI/machine-learning secular data-center growth”.

Although Nvidia’s fiscal Q1 2023 earnings surpassed expectations, the firm’s Q2 outlook primarily stoked the AI rally. The Santa Clara-based multinational tech company expects a revenue haul of $11 billion for its fiscal second quarter. This figure is substantially higher than the $7.2 billion income that analysts expect.

Nvidia’s stock shot up 28% after the opening bell to trade at its highest-ever level of $391.50. This substantial upswing raised the company’s stock market value by roughly $200 billion to its current perch of $960 billion. Currently valued at almost a trillion dollars, Nvidia solidified its status as the world’s most valuable chipmaker. Additionally, the software and fabless computer component designer is currently Wall Street’s fifth most valuable company.

Nvidia’s good fortune boosted the valuation profile of several other tech-rooted entities in premarket trade. These include C3.ai Inc (NYSE: AI), Palantir Technologies (NYSE: PLTR), and Arista Networks (NYSE: ANET), which rose 9%, 7.5%, and 7%, respectively. Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL) were also up 2%. Furthermore, Nvidia chip-manufacturing rivals, including Advanced Micro Devices (NASDAQ: AMD) and Micron Technology (NASDAQ: MU), were 8.5% and 4.5% higher, respectively.

Synovus Trust senior portfolio manager Daniel Morgan commented on the Nvidia earnings-triggered AI rally, saying:

“With all the enthusiasm around AI and the fact Nvidia delivered a huge beat for first-quarter results and second-quarter estimates, this gives some actual evidence AI is for real.”

Morgan also revealed that Synovus Trust owns shares in Nvidia.

Will the Nvidia Rally Stand The Test of Time?

With the Nvidia play in full swing, analysts ponder how long the AI rally would last and if the gains would hold. Although some analysts have faith in the staying power of AI, others point out that emerging technologies typically run in distinct cycles. These more pragmatically-inclined analysts reference blockchain, DeFi, and NFTs as recent examples of technologies that experienced a price slump soon after a rally. According to this group of analysts, the prices dropped when the news cycle “was played up”. By contrast, the same group stated that more established fields like streaming and e-commerce have more sustained lasting impacts on investments and the economy.

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Nvidia Earnings Outlook for Current Quarter Induces AI Rally as Company Boosts Production