Nvidia on track for record high driven by A.I. chip demand

Nvidia shares are on track to beat the company's 2021 all-time high closing price after it significantly beat estimates, driven in part by an AI frenzy.

Nvidia on track for record high driven by A.I. chip demand

Jensen Huang, president and CEO of Nvidia, speaks during the company's event at the 2019 Consumer Electronics Show in Las Vegas on Jan. 6, 2019.

David Paul Morris | Bloomberg | Getty Images

Shares of Nvidia are trading up 25% on Wednesday on the back of an outsize earnings report that beat consensus estimates. And, if it holds throughout trading, they're set to close at an all-time high.

Nvidia's prior record high occurred in November 2021, when share price closed over $333. Shares opened Thursday at $385 and gave back some of the overnight gains.

To put its gain in perspective, Nvidia stock is up 235% since its two-year low of $112 on Oct. 14, beating out the performance of any other S&P 500 company since then. Meta is the second best-performing stock with a gain of 97% during the same time period.

The chipmaker's market cap was on track to open at $975 billion after a 30% jump in after-hours trading Wednesday. The company reported first-quarter adjusted earnings per share of $1.09, versus a Refinitiv consensus estimate of 92 cents. Its first-quarter revenue of $7.19 billion was significantly above a consensus estimate of $6.52 billion.

But it was the chipmaker's leading position as an AI chip supplier, coupled with it guiding to $11 billion in sales for the current period, that may have sent shares soaring even higher.

The share price rise puts Nvidia within reach of a trillion-dollar valuation, something only a handful of publicly traded companies have ever achieved. Apple was first valued at $1 trillion in 2018 and reached a $3 trillion valuation in 2022. Alphabet, Amazon, Saudi Aramco, Tesla, Meta and Microsoft have all at one point been valued at $1 trillion or more.

Analysts moved rapidly to up price targets for Nvidia after the company reported earnings results. JPMorgan doubled its price target from $250 to $500 and reiterated its overweight rating. "Generative AI and large language/transformer models are driving accelerating demand," JPMorgan analyst Harlan Sur said.

"What can we say other than just WOW," Evercore analyst C.J. Muse wrote in a Wednesday note. Evercore raised its price target from $320 to $500 and reiterated its outperform rating.

Nvidia's meteoric rise in valuation isn't lifting other chipmakers, however. The AI chip craze has been driven by demand for high-powered graphics processing units, or GPUs. The company has been a historic outperformer in the high-performance "discrete" GPU market, especially compared to Intel.

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Nvidia shares have markedly outperformed both Intel and AMD's share prices.

But neither Intel, which has reportedly struggled to handle inventory concerns and recently executed significant cost cuts, nor AMD has been able to achieve the same level of share price growth as Nvidia. Intel shares were up nearly 10% year-to-date at market close Wednesday; AMD shares were up 67% in that same time.

Nvidia shares were already up 109% year-to-date, prior to the after-hours rise.

CNBC's Michael Bloom, Robert Hum and Kif Leswing contributed to this report.