This Year, Nvidia's Valuation Grows By Nearly $220 Billion Due To AI Mania

According to stock market gains, Nvidia Inc. is the undisputed victor of this year's artificial intelligence mania.

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The Santa Clara, California-based company's shares increased by as much as 13% on Thursday, putting it on track to increase its market value by roughly $65 billion and bring its gains for the year to around $219 billion.

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Goldman Sachs upgraded the stock to buy as the chipmaker revealed fourth-quarter earnings that exceeded expectations and provided an optimistic revenue estimate for the current quarter, despite the fact that almost 20 analysts increased their price targets on the company. The positive forecast indicates that the company's efforts to develop AI processing processors are having an impact.

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Analysts and investors believe that Nvidia will profit as more people use ChatGPT-like services since it dominates the market for graphics chips intended for the difficult computational processes required to power AI applications.

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Russ Mould, investment director at AJ Bell, stated that it is only natural for investors to search for methods to capitalize on "the next big thing" in technology. Nvidia's involvement in the AI industry has brought company into the public eye, which suggests that there may be high demand for the shares.

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The hope is that chatbot operators will require more processing capacity as they reply to the millions of inquiries they receive from all across the internet, from deadline-driven students to struggling composers.

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Technology Jargon

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After the enormous success of OpenAI's ChatGPT application, AI has swiftly become the newest buzzword in technology. Now that technological giants like Microsoft Corp. and Alphabet Inc. have announced their AI projects recently, everyone wants to get in on the action. Despite this, these stocks have lagged the tech-heavy Nasdaq 100 Index.

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Nvidia said it was working with Oracle Corp., Microsoft, and Google to provide the option to use Nvidia GTX machines for AI processing through a simple web interface. Nvidia introduced its own AI cloud service on Wednesday.

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The stock is now overvalued due to the recent surge. According to data provided by Trade Algo, the shares are currently trading at 56 times forecast earnings, making them significantly more expensive than the Philadelphia semiconductor index, which is trading at approximately 20 times, and the Nasdaq 100, which is trading at 23 times.

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Greg Bassuk, CEO of AXS Investments, stated that it "appears that investors are willing to pay a premium multiple based on Nvidia's growth trajectory."

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The stock may have "gone too far, too fast on the euphoria about AI," according to Bassuk.