Why Nvidia stock rallied to a new all-time high on Wednesday

The changing of the guard bodes well for the artificial intelligence (AI) chip specialist.

| More on:
A young kid with dark glasses rocks out with a guitar.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of Nvidia (NASDAQ: NVDA) surged higher on Wednesday, jumping as much as 4.7% to a new all-time high. As of 3:02 p.m. ET, the stock was still up 4.62%.

The catalyst that sent the chipmaker and artificial intelligence (AI) specialist higher was the outcome of the U.S. presidential election and what it means for the future of AI.

Clear momentum

There's no denying the impact of AI on the stock market over the past couple of years, and Nvidia has been a prime example. The company's graphics processing units (GPUs) have become the gold standard for supplying the computational horsepower required to train and run generative AI models. This, in turn, has fueled five consecutive quarters of sales and profit growth of 100% or more.

Wedbush analyst Dan Ives released a missive in the wake of the election results, saying he expects "a strong AI focus out of the gates from Trump for U.S. Big Tech players." He went on to posit that "AI initiatives will ramp in the U.S. ... [which] would be a major tailwind" for players in the space."

Analysts at UBS echoed those thoughts, noting that "AI adoption and monetization have picked up further." They went on to say that thanks to big tech's AI-related spending spree, "the growth story of AI remains robust."

As the de facto poster child for advances in AI, what's good for AI is certainly good for Nvidia.

The future looks bright

To be clear, investors shouldn't expect the triple-digit growth that Nvidia has delivered in each of the past five quarters, but its results will be robust, nonetheless. For its fiscal 2025 third quarter (ended Sept. 29), management is guiding for revenue of $32.5 billion, which would represent growth of 79%, with a commensurate uptick in profits. Furthermore, the upcoming release of its next-generation Blackwell AI-centric processor has already seen extraordinary demand, according to Nvidia, which bodes well for the future.

At 34 times forward earnings, Nvidia stock isn't exactly cheap, but given the company's position as the leading provider of AI chips, I would argue it's worth every penny.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Danny Vena has positions in Nvidia. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A handsome smiling man sits in the front seat of an electric vehicle with his hands on the wheel feeling pleased that the Carsales share price is going up and the company will shortly pay its biggest dividend ever
International Stock News

Why Tesla stock just skyrocketed

Why is Donald Trump's election victory powering explosive gains for Tesla stock?

Read more »

Man holding up betting slip and cheering along with two friends in front of TV
International Stock News

Elon Musk's big gamble: Will Tesla stock plunge if Kamala Harris wins the election?

The Tesla CEO has been an outspoken advocate for GOP presidential candidate Donald Trump. Will it backfire?

Read more »

Four investors stand in a line holding cash fanned in their hands with thoughtful looks on their faces.
Economy

Up 20% this year. Does the S&P 500 Index have more in the tank for 2024?

Will US stocks hold up after the election?

Read more »

two young boys dressed in business suits and wearing spectacles look at each other in rapture with wide open mouths and holding large fans of banknotes with other banknotes, coins and a piggybank on the table in front of them and a bag of cash at the side.
International Stock News

2 magnificent S&P 500 dividend stocks down 27% to 51% to buy and hold forever

These stocks hold potential to act as growth and income plays.

Read more »

A young female investor with brown curly hair and wearing a yellow top and glasses sits at her desk using her calculator to work out how much her ASX dividend shares will pay this year
International Stock News

One Wall Street analyst thinks this emerging Artificial Intelligence stock could rise 60% in the next year

SoundHound AI is on the doorstep of a big year.

Read more »

man looks up at apple on his head
International Stock News

Why did Warren Buffett sell more Apple shares?

Does Buffett know something we don't?

Read more »

A male party goer sits wearing a party hat and with a party blower in his mouth amid a bunch of balloons with a sad, serious look on his face as though the party is over or a celebration has fallen flat.
International Stock News

What snapped the S&P 500 winning streak last night?

The S&P 500 almost made October a winner, but fell at the final hurdle.

Read more »

Man going down a red arrow, symbolising a sliding share price.
International Stock News

Why Nvidia stock is sinking today

Investors were spooked by economic data and the ambitions of a deep-pocketed rival.

Read more »