Nvidia’s (NVDA) record closing price on Monday came as AI hardware stocks continue their recent slide on investor enthusiasm for surging demand for artificial intelligence.
Nvidia stock has risen 8% since last week, moving the chipmaker closer to dethroning Apple (AAPL) as Wall Street’s most valuable company. The stock’s rise follows recent comments from CEO Jensen Huang and chipmaker partners touting strong demand for the company’s AI chips.
Other AI chip and hardware stocks Arm (ARM), Qualcomm (QCOM), Broadcom (AVGO), Super Microcomputer (SMCI), Astera Labs (ALAB), and Micron (MU) also made individual announcements. It rose because of this. Thanks to the AI boom, they are showing strong demand for their products. TSMC (TSM) stock also closed at a record high on Monday.
Overall, the PHLX Semiconductor Index (^SOX) is up 4.5% over the past five days, outperforming the S&P 500 (^GSPC), which is up 2.9% over the same period.
The upward trajectory of AI chip stocks bodes well for AI hardware spending, allaying Wall Street’s concerns about a short-term investment slowdown.
“Phase 2 stocks (AI infrastructure stocks like Arm, TSMC, SMCI, etc.) look a little expensive relative to history, but demand for AI could lead large tech stocks to increase spending on AI even more.” Investment “The associated capital expenditures were higher than the home and analysts currently expect,” Goldman Sachs analysts said in an Oct. 10 report.
Google (GOOG), Microsoft (MSFT), Amazon (AMZN), and Meta (META) all continue to invest heavily in AI infrastructure into next year to benefit AI hardware companies led by Nvidia. It suggests that. Overall, large tech companies plan to spend $215 billion in AI capital spending in 2024 and $250 billion in 2025, according to Goldman Sachs.
OpenAI’s recent $6.6 billion funding round is also expected to put cash into the hands of a hardware company that continues to evolve its AI models: Nvidia.
JPMorgan analyst Harlan Suhl expects semiconductor industry revenue to grow 6% to 8% in 2024. “We remain positive on semiconductor and semiconductor equipment stocks as we believe stock prices will continue to rise,” he said in a recent note to investors. We expect an improvement in demand and supply in the second half of 2024/25 and a stable/upward trend in profitability in 2024/25. ”
However, a slowdown in investment will come at some point. The question is when?
AI software is typically offered on a subscription basis, while hardware is a one-time sale. Analysts have warned that AI chip stocks are in a bubble that will eventually burst if Big Tech eases its massive spending on AI infrastructure.
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Indeed, the latest earnings reports from tech giants tested Wall Street’s waning patience by revealing a widening gap between big spending on artificial intelligence infrastructure and returns on investment. Shares of Google, Microsoft, and Amazon all fell late this summer after their quarterly financial reports showed billions of dollars in AI spending.
“We continue to believe that spending on data center infrastructure will be strong this year and likely into next year,” DA Davidson analyst Gil Luria told Yahoo Finance in an email. As early as next year (calendar). ”
Laura Bratton is a reporter for Yahoo Finance. X Follow her at @LauraBratton5.
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