Nvidia Stock Soars as AI Investment Surges

Nvidia stock surged on Tuesday, with the semiconductor giant emerging as a primary beneficiary of the capital influx into Elon Musk’s artificial intelligence start-up, xAI. This recent growth narrows its valuation gap with Apple to the smallest margin in over 15 years.

Record-Breaking Share Price

Nvidia’s shares climbed 7% to $1,139.01, following a 2.6% rise on Friday before the Memorial Day weekend. With Apple’s stock remaining relatively unchanged, Nvidia is now valued at just $65.80 billion less than the tech behemoth, the closest it has been since January 2009.

Nvidia’s surging stock narrows gap with Apple, highlighting its growing dominance in the tech industry, WSJ Print Subscription said.

xAI’s Massive Funding Round

On Sunday, Musk’s xAI announced it secured $6 billion in its latest funding round. This elevates the valuation of the year-old start-up to $24 billion. The company will use the funds to launch its first products, develop advanced infrastructure, and accelerate research and development.

Implications for Nvidia

Nvidia needs continued AI sector activity to sustain its impressive growth trajectory. xAI’s funding is a positive indicator. Unlike Amazon, Google, Meta, and Microsoft, xAI’s approach suggests spending much of the new capital on Nvidia’s hardware. xAI has not indicated plans to develop its own chips.

AI Sector Developments

Microsoft-backed OpenAI revealed on Tuesday its commencement of training the next frontier model. However, they did not disclose specifics about the training infrastructure. AI training budgets could increase tenfold every one to two years. Macquarie analyst Frederick Havemeyer provided this estimate. “We believe the AI investment cycle is still in its early stages,” noted Havemeyer in a research report. He added that new inference infrastructure might eventually match the scale of all current global datacenters.

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Collaboration with Oracle

Musk’s xAI collaborates with cloud-computing firm Oracle for access to data centers and computing chips. Oracle recently inked a new cloud-computing infrastructure agreement with Nvidia and announced plans to increase capital expenditures in the next fiscal year. Musk has mentioned that xAI aims to construct a supercomputer to support the next version of its AI chatbot Grok, potentially in collaboration with Oracle to create a connected cluster of Nvidia chips at least four times larger than the biggest equivalents today. This information was reported over the weekend, citing a presentation made to investors. Oracle and xAI did not immediately respond to requests for comments. According to the report, Musk aims to have the proposed supercomputer operational by fall 2025.

Market Reactions

Among other chip manufacturers, Advanced Micro Devices saw a 0.6% increase, while Intel gained 0.1% in morning trading. Nvidia shares have risen 115% this year, compared to an 11% increase in the S&P 500 index and a 13% gain in the Nasdaq Composite Index for 2024.

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