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Why Nvidia Stock Popped This Week
Shares of Nvidia (NASDAQ: NVDA) surged this week, jumping as much as 14.6%, according to data supplied by S&P Global Market Intelligence. At 12:36 p.m. ET on Thursday, the stock was still up 8.5%.
The catalysts that sent the semiconductor specialist higher were intriguing developments in the field of artificial intelligence (AI) and a highly anticipated stock split.
An AI rock star
Nvidia took center stage at the Computex trade show in Taiwan this week, as CEO Jensen Huang delivered the keynote address. Multiple media accounts suggest that the chief executive was treated like a rock star, with throngs of fans cheering him on and photographers from the local media documenting his every move.
Of interest to investors was Huang's announcement that Nvidia has accelerated its product upgrade cycle. "Our company has a one-year rhythm," he noted. "Our basic philosophy is very simple: Build the entire data center scale, disaggregate and sell to you parts on a one-year rhythm, and push everything to technology limits."
This has significant implications for Nvidia's future success. Rivals have been scrambling to develop a worthy competitor to Nvidia's gold-standard AI processors, but the accelerated timeline will make that task even more difficult.
The other major factor at play is Nvidia's highly anticipated 10-for-1 stock split, which will take place after market close on Friday. The frenzy has been building in recent weeks and briefly pushed Nvidia above a $3 trillion market cap for the first time.
What the future holds
Some investors have been fretting in recent months about whether the AI revolution has staying power, but the available evidence suggests AI adoption continues at a brisk pace. Just this week, Hewlett Packard Enterprise reported better-than-expected fiscal second-quarter results and cited the uptake of AI as the driving force. This suggests the proliferation of AI will continue.
Furthermore, Nvidia is the leading provider of chips used in machine learning -- an earlier branch of AI -- with an estimated 95% share of the market, despite competing AI chips that have been around for years. Nvidia also controls an estimated 95% of the market for data center graphics processing units (GPUs).
This suggests that despite rising competition, Nvidia is still the name to beat in AI processing.
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Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
