Why Are NVIDIA Stocks Surging in 2024?

Rise in NVIDIA stocks: Development of supercomputers and GenAI?
Why Are NVIDIA Stocks Surging in 2024?
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Nvidia's growth is still strong; on June 18, 2024, it crossed the $3 trillion threshold. By the end of August 2024, it had fallen slightly short of that amount. After Apple and Microsoft, Nvidia is currently the third-largest publicly traded American firm in market capitalization.

By the middle of 2023, Nvidia had surpassed the $1 trillion threshold and was worth more than Alphabet, Google's parent company, and Amazon. The corporation's market value rose from $1 trillion to $2 trillion in February 2024 in just nine months, then from $1 trillion to $3 trillion in June 2024 in just three months. Despite its remarkable increase, Nvidia's stock saw a 5% decline following the company's 2024 second-quarter results announcement.

Nvidia took a while to gain popularity. Technology had a difficult year in 2022. Despite tech layoffs, it began to recover in 2023. One of the primary forces behind its comeback is generative AI, and the stock market is beginning to reflect this. With a strong concentration of tech equities, the Nasdaq index ended 2023 up 43%. The emergence of generative AI sparked a tech bull market, a period of stock market growth.

The Ascent of Nvidia

Nvidia is among the top manufacturers of GPUs worldwide. GPUs are semiconductors or computer circuits that generate graphics and visuals through mathematical computations. The GPU manages and accelerates graphic workloads and also shows visual content on a PC or smartphone.

Throughout 2023, Nvidia's earnings report consistently above forecasts as AI began to garner traction. With Nvidia's cutting-edge CPUs, enormous volumes of data can be used and processed to train generative AI applications like ChatGPT and Gemini. Given that Nvidia dominated this market before the growing need for AI, the company only got bigger as the market did.

Nvidia's fiscal second quarter ended July 28, 2024, and the company recorded $30 billion in sales. This revenue increased by 152% yearly and 15% from the preceding quarter. With record quarterly data center revenue of $26.3 billion, the company outperformed the industry year over year and quarter, rising 154% and 16%, respectively.

The Main Causes of Nvidia's Stock Gain

One of the main drivers of Nvidia's growth has been the development of generative AI. A few other factors, though, contributed to the notable rise in Nvidia stock.

1. The Development of Supercomputers

Nvidia's CPUs power supercomputers because of the vast volumes of data required for this cutting-edge technology. With its AI Research SuperCluster computer, businesses like Meta use supercomputing technology to train sophisticated AI models. Tesla is also beginning to construct a supercomputer with an AI focus for its cars.

2. Requirement for Generative Artificial Intelligence

As more systems are implemented, Nvidia is expected to see growth due to the growing demand for generative AI. According to Bloomberg Intelligence, the AI market is predicted to expand at a compound annual growth rate of 42% over the next ten years. Due to the high demand for generative AI products, by 2032, the generative AI industry might be valued at $1.3 trillion.

Nvidia's future

Even if most of the data centers that support generative AI are powered by Nvidia's processors, some obstacles may remain, such as increased competitiveness, economic uncertainty, and competition from tech giants producing their own AI chips.

Although new laws and regulations are anticipated to be established that may impact Nvidia's AI processors, the market for generative AI is predicted to continue expanding. Since China accounted for a sizable portion of Nvidia's data center sales, the U.S. trade restrictions on China's sophisticated semiconductors are also affecting the company's growth.

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