Analysis: Why Is Nvidia Stock Going Up?

Nvidia (NVDA) stock keeps climbing, with a 7% jump today by 1 p.m. ET, even though the company hasn't released any new updates. Last week's quarterly earnings report already boosted Nvidia's stock, but today's rise is driven by news from another company. Nvidia's strong sales performance has investors excited, especially with the potential addition of Elon Musk's xAI as a major new customer. This growing interest suggests Nvidia's stock could continue its impressive ascent. Investors will likely continue to monitor Nvidia's developments closely, anticipating further gains in the stock price.

Why Nvidia Can be Worth So Much?

Investors were highly impressed by Nvidia's robust earnings report, which led to a significant "triple increase" in its stock price, accumulating about a 20% rise over three days. This momentum also propelled the NASDAQ to close at record highs for three consecutive trading days. On the night of May 28 EST, Nvidia's upward trend persisted, with the stock rising by 1.97% to $1161.41 as of the press release.

Beside, Nvidia's stock surged when the company began capitalizing on the demand for its processors used in artificial intelligence (AI) applications. Sales of its GPUs have continued to soar, with Nvidia projecting that revenue for the current quarter will more than double compared to the same period last year.

These sales are driven by a diverse range of technology companies developing AI large language models and significantly boosting their computing power. Last year, Nvidia's top GPU customers included many prominent companies. Among them was Elon Musk's Tesla. Now, another Musk venture, xAI, has announced it raised $6 billion in fresh capital. Many believe a significant portion of these funds will be spent on Nvidia's processing chips.

Although xAI was not among Nvidia's top dozen customers for H100 GPUs in 2023, this recent development has investors optimistic about the sustained demand for Nvidia's AI chips. This is why Nvidia's stock is considered a buy, even after its recent climb to record levels.

Will Nvidia Continue to Rise?

Nvidia's stock has shown exceptional growth driven by the AI revolution and strong financial performance. The company's leadership in the AI chip market, coupled with robust demand for its data center GPUs, suggests that the stock may continue to rise. However, potential risks such as deceleration in growth and supply constraints should be monitored. Derren Nathan, head of stock analysis at Hargreaves Lansdown, said: “The market has been trying to keep up with the company's improving growth trajectory. The current expected price-earnings ratio is around 35 times, and it still doesn't feel like a bubble zone.”

Given these factors, Nvidia remains an attractive investment, but investors should stay informed about market conditions and company performance.