AI-Linked Stocks Add $300 Billion on US Market; Nvidia Becomes Fifth-Most Valuable Company

Stocks of companies with significant exposure to artificial intelligence firms surged again on Wednesday, followed by news that chip giant Nvidia Corporation said it expected strong revenue growth and said it was increasing the production of its AI chips to meet rising demand.

Overall, AI-linked stocks added about $300 billion in market capitalization following the latest frenzy in the market. Nvidia surged 28 percent to $391.50 after the bell, taking the shares to their highest level ever. With Wednesday’s surge, Nvdia’s market capitalization stands at more than $960 billion, making it the fifth-most valuable company in the US, according to Reuters calculations.

Nvidia Data Center Chips

Nvidia said it expects quarterly revenue to rise 50 percent more than analysts’ estimates. Nvidia chief executive Jensen Huang said the chipmaker will significantly increas the supply to meet surging demand for its data center chips.

Shares of other corporations related to AI rallied on the back of Nvidia’s strong report, adding another nearly $100 billion in stock market value after the bell.

Bullish sentiments over the beneficial impact of artificial intelligence tools like ChatGPT on businesses has given the US stock market a rare push this year. According to reports earlier this month, the rally in several key stocks helped the S&P 500 index gain as much as 9 percent so far this year. This was mainly driven by optimism that new technologies will increase the profitability of corporates.

While Nvidia made the most gains on Wednesday, chipmaker Advanced Micro Devices Inc (AMD) rose more than 10 percent. Microsoft Corp and Google parent Alphabet also edged higher by 2 percent.

Wider Impact

According to a Reuters report earlier, the stocks of Microsoft, Google parent Alphabet, Nvidia, Apple and Meta Platforms together accounted for the S&P 500’s rally this year. Nearly 50 percent of the gains were due to the buzz around artificial intelligence, said Jessica Rabe, co-founder of DataTrek Research, according to the agency.

The contribution of AI-linked stocks to the US market is such that, if these were not accounted for, the S&P index would have dropped drastically this year. A recent Societe Generale analysis found that if some 20 stocks whose ownership is tied to AI-related exchange-traded funds were removed from S&P500, the index would report a 40 percent drop this year. “It’s the AI-driven stocks that are getting the strongest returns … As a secular theme, for sure, it’s attractive,” the head of US equity strategy at SocGen said.

It was reported last year that the sudden rise of the AI industry after the introduction of ChatGPT boosted the wealth of tech pioneers. American tech giant Nvidia’s CEO Jensen Huang is one of the biggest gainers, whose wealth surged 98 percent in just one year. This is the highest increase in wealth for any other US billionaire, according to the Bloomberg Billionaires Index.

Following the emergence of ChatGPT, several other tech giants like Google, Meta and Amazon have also launched cutting edge AI tools. Companies around the world are projecting the large scale integration of AI tools into business strategies. The next few years will see more of this, leading to the replacement of human roles by AI, which will save billions of dollars in cost for companies.