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AI mania propels Nvidia towards $1 trillion valuation

Jensen Huang, president and chief executive officer of Nvidia Corp - David Paul Morris/Bloomberg
Jensen Huang, president and chief executive officer of Nvidia Corp - David Paul Morris/Bloomberg

US chipmaker Nvidia is close to becoming a $1 trillion (£800bn) company as booming demand for artificial intelligence (AI) hardware sent its shares soaring.

The graphics chip designer is poised to join big tech giants Apple, Microsoft and Amazon in attaining the lofty valuation after it forecast sales of $11bn for the three months to July, far higher than Wall Street predictions.

Nvidia said its sales would come in 50pc ahead of analyst expectations as tech companies hoard its graphics processors to power AI software.

Shares in the microchip giant jumped by 27pc in after-hours trading in New York on Wednesday night, adding $200bn to its valuation. The company’s shares were traded for as much as $390 ahead of US markets opening on Thursday, valuing Nvidia at around $950bn.

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Surging interest in AI bots such as ChatGPT, which can be used to compose emails or write code, has led to companies racing to buy the most powerful microchips. High demand and limited supply have seen some graphics chips reselling for tens of thousands of pounds.

Elon Musk, who is planning to launch his own AI start-up, said earlier this week these processors were “considerably harder to get than drugs”.

Jensen Huang, Nvidia’s chief executive, said: “We are significantly increasing our supply to meet surging demand for them.”

Nvidia’s results also bolstered rival chip companies: shares in AMD rose 8pc while Taiwanese chip foundry TSMC rose 3pc.

Shares in Nvidia have already doubled so far this year as investors seek out companies best placed to benefit from the hype surrounding AI.

Richard Windsor, an analyst at Radio Free Mobile, said the “mania around generative AI is driving unprecedented demand for its products”. However, he added that there was a risk the “hype cycle of super-intelligent AI will hit the buffers sooner or later”.

Dan Ives, an analyst at Wedbush Securities, said Nvidia’s sales projections were “jaw dropping”, adding the surge “shows the historical demand for AI happening now in the enterprise and consumer landscape”.