£700bn share price rally that has lit up Wall Street

Shares in US chipmaker Nvidia hit an all-time high last night as it cashed in on the artificial intelligence (AI) boom taking Wall Street by storm.

The stock surged after it revealed a blockbuster second quarter – smashing expectations and showing that the AI craze was here to stay.

Nvidia has been one of the winners of the explosion of AI, with its chips playing a vital role in ChatGPT, which has shifted the tech from fringe topic to a household name.

In a bumper set of results on Wednesday night, Nvidia said revenues more than doubled to £10.6billion in the three months to the end of June, and would climb to £13billion in the current quarter, a rise of around 170 per cent compared to the same time last year.

The business also posted an 843 per cent jump in its quarterly profits to £4.9billion.

The figures sent the shares soaring more than 6 per cent in New York yesterday to over $500 apiece for the first time.

Although the gains eased throughout the day’s trading, the shares have more than tripled this year alone, adding £700billion to Nvidia’s value.

That is around the same as the six biggest companies on the FTSE 100 are worth combined – from AstraZeneca and HSBC to Shell and BP as well as Diageo and Unilever.

The meteoric growth has handed a windfall to Nvidia’s founder and chief executive Jensen Huang, whose own wealth has ballooned by as much as £25billion so far this year. He owns a 3.5 per cent stake, worth £33billion.

Founded in 1993, the story of the world’s most valuable chip maker started at a Silicon Valley diner, with Huang and two other engineers, Chris Malachowsky and Curtis Priem. Uncertain exactly what their business would look like, their initial strategy was to place early bets on markets that barely existed at the time, starting out with PC gaming and graphics processing.

This proved a major success, with their graphics processing unit now essential in the world of gaming in popular titles such as Call of Duty.

It also enjoyed some hype during the launch of the ‘metaverse’, the virtual reality pushed by Facebook founder Mark Zuckerberg when he rebranded the company as Meta in 2021.

But its most recent bet in the world of AI has proved its most lucrative, making it the first semiconductor company to rack up a $1trillion market valuation in May.

It now means Nvidia, whose market cap is around $1.2trillion (£950m), is now a firm member of the ‘Magnificent Seven’ alongside fellow American corporate giants Alphabet, Amazon, Apple, Meta, Microsoft and Tesla.

And analysts are confident that its spot in this elite club will not be short-lived.

Dan Ives, tech analyst at Wedbush Securities, said: ‘Nvidia’s guidance was a ‘drop the mic’ moment as investors now recognise this AI demand story is as real as any tech trend we have seen in the last 30 years. It is only comparable to the internet in 1995 and Apple’s iPhone launch in 2007.’

Danni Hewson, head of financial analysis at AJ Bell, said: ‘Confidence is a funny thing. Without it markets limp along as investors shun risk and double down on perceived safe havens. With it sectors soar, and that’s exactly what happened after Nvidia proved the AI phenomena is no flash in the pan.’

But it’s not just analysts who are bullish about Nvidia.

Windfall: Nvidia’s founder and chief executive Jensen Huang

‘A new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI,’ said Huang, who is known for his black leather jackets and a tattoo that looks like the Nvidia logo.

‘We have excellent visibility through the year and into next year,’ he added. ‘I think this is not a near-term thing, this is a long-term industry transition.’

And to truly underline this point, the company has said that it would buy back another £20billion of its shares, a move most firms make when leadership thinks the company is undervalued.

The company said it to ramp up production of its hardware into next year, appearing to silence doubts about whether this diner coffee-fuelled, start-up turned chip giant will keep growing.