Nvidia's surge adds $277 billion in market value, spurring record stock rally

In a historic feat, chip maker Nvidia's market capitalisation surged by $277 billion in a single day.

The surge, propelled by Nvidia's quarterly report surpassing analysts' expectations, reignited optimism surrounding artificial intelligence (AI). 

"The speed (at which Nvidia's stock is rising) is faster than I had expected, but I think it's justified (given the fundamental improvements in AI computing )", Reuters quoted Russ Mould, investment director at AJ Bell as saying.

Nvidia's stock skyrocketed by 16.4 per cent to close at $785.38, setting a new record-high close and making it the third-most valuable company in the US stock market, surpassing tech behemoths like Amazon.com and Alphabet.

The surge in Nvidia's market value not only outpaced the entire value of Coca-Cola but also propelled the broader S&P 500, Europe's STOXX 600, and Japan's Nikkei share average to record highs, underscoring the ripple effect of Nvidia's performance across global markets.

Investor sentiment soared as Nvidia forecasted a 233 per cent growth in current-quarter revenue, surpassing market expectations and signalling strong demand for its chips.

Advanced Micro Devices and Broadcom, among other chipmakers exposed to AI, also witnessed significant rallies, further fuelling the optimism surrounding the tech sector.

The Philadelphia chip index surged to a record high with its biggest one-day gain since May 2023, while the S&P 500 and the Nasdaq also soared to new heights, signalling a broader market rally.

While Nvidia's meteoric rise has garnered widespread acclaim, concerns lingered among some analysts regarding the company's rapid growth trajectory and potential headwinds such as US curbs on chip sales to China.

Despite the rapid pace of gains, at least 17 brokerages raised their price targets post-results, reflecting bullish sentiments.

However, UBS tempered its optimism, citing concerns over a potential slowdown in revenue growth.

"We've gotten well ahead of expectations and baked in a lot for the next three years," remarked Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest.

Short sellers, who bet on Nvidia's stock decline, rushed to close their trades, having incurred significant losses amid the stock's ascent.

(With inputs from Reuters)