Nvidia Clears the Way for AI Stocks to Keep Powering Higher

Nvidia Corp. just gave the green light to traders betting that the rally in artificial intelligence computing stocks — not to mention its own — has room to run.

Another estimate-thumping earnings report and forecast from the chipmaker sent its shares up more than 7% in postmarket trading, putting to rest lingering concerns that the spending spree on data-center gear over the past year might be due for a slowdown.

Nvidia’s results sent a broad swath of hardware stocks rallying on Wednesday evening. Among the biggest gainers were server makers Super Micro Computer Inc. and Dell Technologies Inc.,

which climbed more than 4%. Taiwan Semiconductor Manufacturing Co., maker of Nvidia’s chips, rose more than 3%, while chipmakers Broadcom Inc., Marvell Technology Inc. and Advanced Micro Devices Inc. rose more than 2%.

“We’re in a technology revolution and still in the early days of it,” Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, said after Nvidia’s results. “It is really hard to not be positive right now, especially on Nvidia.”

Nvidia’s postmarket gain sent the stock above $1,000 for the first time. If the advance holds on Thursday, the chipmaker is set to add more than $100 billion in market value and push the stock’s rise for 2024 over 100%.

Helping to fuel Nvidia’s rally was its announcement of a 10-for-1 stock split that the company said was aimed at making shares more accessible to employees and investors. The split would be Nvidia’s second in the past three years, with the stock climbing more than 500% since the last one was announced in May 2021.

Of course, stock splits have no fundamental effect on share value. They’re the stock market equivalent of exchanging a $10 bill for 10 $1 bills. Still, they tend to help drive buying from mom-and-pop investors, according to Alec Young, chief investment strategist at Mapsignals.

“The split is huge news,” Young said in an interview. “You shouldn’t underestimate the appeal of stocks that are retail favorites.”

For his part, Nvidia Chief Executive Officer Jensen Huang said demand for generative AI computing is expanding beyond cloud computing providers to other industries like automotive and health care.

The results provided further evidence to Michael Sansoterra, chief investment officer at Silvant Capital Management, that the AI rally will continue.

“It says not only is the data-center spend strong for AI, but it also says that the folks working around the periphery will probably continue to do well as well,” he said. “That bodes well for the health of the AI market, which is still in its early stages.”