The chip company that is cashing in on the market’s artificial-intelligence obsession seems to many investors like an unstoppable force
5 min
Nvidia ’s historic run is minting profits for investors big and small . Many are betting the boom is just beginning.
They are piling into trades that the chipmaker’s shares, which have more than tripled over the past year , are headed still higher. Some have turned to the options market to look for ways to turbocharge their bets on artificial intelligence after a blockbuster earnings report sent the stock up 17% over the past two days.
The exuberance reflects hope that the company is the vanguard of wide adoption of artificial intelligence—and an intense fear of missing out among investors who have sat on the sidelines while the company’s valuation has eclipsed $2 trillion .
With the help of Nvidia, stocks have stormed into 2024 . The S&P 500, which has chalked up fresh records in recent weeks, is up 6.7%. That is the index’s second-best performance for this time period over the past 10 years. The gains were only surpassed by an 11% increase in 2019.
Nvidia has contributed to about a quarter of those gains, according to S&P Dow Jones Indices.
The Nasdaq, too, is up 6.6% this year and neared a record Friday. The tech-heavy index has been boosted by Nvidia, which this week tacked on $277 billion in additional market value, along with six other tech titans collectively known as the Magnificent Seven.
The Dow Jones Industrial Average is up 3.8% this year and has hit repeated records in recent weeks.
“You look at these numbers and what this company’s done—it’s almost without precedent,” said Mike Ogborne, founder of San Francisco-based hedge fund Ogborne Capital Management, who counts Nvidia among his top five biggest holdings . “It is nothing short of amazing.”
Ogborne compared AI with the launch of the internet more than two decades ago, which kick-started a technology craze that lasted years.
“It’s exciting,” Ogborne said. “It’s great for America.”
Tamar June in Reno, Nev., is one investor along for Nvidia’s furious stock-market ascent. Since the 1990s, the 61-year-old software-company chief executive has been buying shares of tech firms, including Apple , Microsoft , Cisco, Intel and Oracle . June had been familiar with Nvidia for some time but in recent years kept reading about the chip company in the news. She liked that it was profitable and growing.
June decided to purchase some shares in 2022 at about $260, then watched the stock erase more than half of its value later that year. She held on, knowing that Nvidia’s graphics processing units were in high demand for cloud computing. Then, an AI frenzy hit the stock market in 2023, sending Nvidia’s stock soaring.
Now, Nvidia shares are closing in on $800, and June is looking for opportunities to buy more. She isn’t fazed by worries that the AI boom is bound to come crashing down. June experienced the bursting of the dot-com bubble and the 2008 financial crisis—and watched stocks bounce back to new highs.
“I think it’s still in the beginning stages,” June said of AI developments. “There’s still a lot of headroom for technology because our whole future depends on it.”
A herd of investors chased Nvidia while it raced toward its $2 trillion valuation.
At Robinhood Markets , Nvidia was the most purchased stock by customers on a net basis and received the heaviest notional trading volumes over the past month, according to Stephanie Guild, head of investment strategy at the digital brokerage.
The rise drove many traders to pile into the company’s options, a risky corner of the market notorious for boom-and-bust trades.
Nvidia has also morphed into one of the most popular trades in this market, with traders placing more than $20 billion in stock-options bets tied to the company over the past week, according to Cboe Global Markets data. That was more than what they spent on Tesla , Meta Platforms , Microsoft, Apple, Amazon and Alphabet combined.
Call options, contracts that confer the right to buy shares at a specific price, were particularly popular. And many of the trades appeared to suggest that investors were fearful of missing out on bigger gains to come. Some of the most active trades Friday were calls pegged to the shares jumping to $800 or $850, up from their closing price of $788.17. Betting against the shares has been a losing game , leading many investors to throw in the towel on bearish wagers.
The values of many of these options bets exploded while Nvidia soared, rewarding those who piled in. The big gains also enticed others to join in the trades while the stock’s rally continued.
“There’s a snowball effect,” said Henry Schwartz, a vice president at exchange-operator Cboe Global Markets, of the options activity surrounding Nvidia.
Ahead of the tech behemoth’s earnings report Wednesday, options pegged to the shares jumping to $1,300 —around double where they were trading at the time—were some of the most popular trades.
And for some investors, the 16% one-day jump in Nvidia’s share price Thursday wasn’t enough. They sought even bigger returns and piled into several niche exchange-traded funds that offer magnified exposure to Nvidia stock.
The GraniteShares 2x Long NVDA Daily ETF has taken in almost half a billion dollars from investors on a net basis since launching late in 2022. The fund’s shares have more than doubled in 2024 and have surged nearly 650% since inception.
There have been few signs of profit-taking so far. Investors added a net $263 million to the fund in the past month. The fund’s cousin, which turbocharges bearish bets against Nvidia, has been much less popular.
The euphoria surrounding Nvidia has spread to other stocks, too. Shares of Super Micro Computer , a much smaller company worth less than $50 billion, popped more than 30% Thursday after Nvidia’s earnings report. Traders spent more than $5 billion on options tied to the company, more than what they spent on Tesla this week. Tesla is worth about 13 times as much as the company.
Nvidia’s continued, rapid ascent has stunned even early bulls on semiconductors and generative AI.
Atreides Management founder Gavin Baker, who started covering Nvidia as an analyst at Fidelity in 2000, reminded investors in his Boston hedge fund in an early 2021 letter of Marc Andreessen ’s adage that software was eating the world. “Today, AI is replacing software,” he wrote.
Atreides started buying Nvidia shares in the fourth quarter of 2022, according to regulatory filings.
The wager proved profitable. But as Nvidia shares kept soaring, Baker started selling. Atreides was out of Nvidia by the end of the second quarter of 2023. “This has been a painful mistake,” Baker wrote in a June 2023 letter to his clients, when Nvidia was trading north of $420 a share.
Atreides’s stake in competitor Advanced Micro Devices has helped alleviate the pain from missing out on larger gains. The firm made nearly a quarter billion last year alone on AMD, which it continues to hold along with several other related bets.
Michael Hannosh, a 20-year-old college student in Chicago, said he first purchased shares of Nvidia in August 2022, when the stock traded below $180. Nvidia was one of his first-ever stock purchases. He had built a custom computer for videogaming and used a lot of Nvidia parts.
Hannosh said he kept the shares until last March, then sold them for a roughly 30% profit. He later bought a few more shares at about $230 and sold them over the course of the next several days at a profit.
The shares have tripled since.
“It’s blown my f—ing mind to bits. It’s insane,” said Hannosh. “I really wish I held it, obviously.”
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Nvidia’s earnings will test Wall Street’s confidence in the AI boom.
3 min
Chip makers are fighting to assure investors that the artificial-intelligence boom is racing forward. Wall Street might not believe it until Nvidia’s NVDA -0.98%decrease; down pointing triangle Jensen Huang says so.
When Huang steps up to the mic for his company’s earnings call Wednesday, he will have the world’s attention. What he says about Nvidia’s present will preview the future of AI, dictate the path forward for a tech-crazed stock market and influence an American economy increasingly tethered to hopes that the boom won’t go bust.
The $5 trillion chip maker has provided the key building blocks for AI since the launch of ChatGPT in 2022 set off a race for dominance among OpenAI, Anthropic and established Silicon Valley giants. Now, as Nvidia backstops sprawling data-center projects and an exotic money pipeline to boost chip demand, the company’s influence is arguably bigger than ever.
But there are signs of trouble ahead. Political pushback to AI is growing. A bond selloff propelled borrowing costs to their highest levels in years. The hyperscalers that include some of Nvidia’s key customers—once cash-printing machines—are relying more on debt. OpenAI recently told investors its revenue rose by a tepid 18% in the second quarter while its losses deepened.
Nvidia is increasingly stepping in to shore up potential weak points across the market. Earlier this month, the company teamed up with six of Wall Street’s biggest firms on a $500 billion AI-financing plan, pledging to backstop lending to customers that can’t afford its chips otherwise. The chip maker last week also took a stake in Cloverleaf Infrastructure, which arranges power for data centers, and struck a $6 billion deal with startup Poolside aimed at developing a powerful open-weight AI model.
After watching shares in other chip makers and the so-called Magnificent Seven tech companies swing wildly in recent months, Wall Street is hoping Nvidia can beat expectations—again. The countdown is on.
“It’s kind of becoming more and more like the World Cup final than the Super Bowl at this point,” said Brian Mulberry, chief market strategist at Zacks Investment Management. “It’s just gotten to be that big.”
The company has smashed analysts’ earnings estimates for each of the 14 quarters since the AI boom kicked into high gear. Nvidia posted 210% annual growth in net income in its last three-month period, according to FactSet, making Wall Street’s 126% projection look pedestrian.
Expectations for a blowout second quarter have risen rapidly over the course of this year. All Nvidia will have to do to beat this target: outrun 95% annual earnings growth to more than $51.5 billion. Analysts project the chip maker will report record sales of $92 billion for the period, up from a forecast of $78 billion at the start of this year.
In July, big-tech earnings sparked volatility. Concerns about runaway capital spending spread across the sector after Alphabet’s and Tesla’s results, driving a $890 billion wipeout that contributed to the unwind of hedge fund Situational Awareness. Microsoft posted the largest one-day gain in market capitalization by any company, ever, after a quarter proving that it could still show investors the money. SpaceX rocketed higher after a record-breaking initial public offering, only to see $1 trillion in value evaporate.
Surging memory prices and borrowing costs have fueled fears that those and other companies will be unable to keep plowing more money into supplies including Nvidia chips. Shaia Hosseinzadeh, founder of OnyxPoint Global Management, has recently bought dips in AI-infrastructure stocks when Wall Street has strained to absorb massive debt issued by Silicon Valley.
“The macro data is really quite robust,” he said. “Of course, there’s a level at which everything breaks.”
Investors have kept pumping money into the AI trade despite concerns around chip consumers—and to the benefit of chip producers. That is why Nvidia’s outlook for semiconductor demand could send ripples through counterparts such as Micron Technology and Sandisk, developers of the data centers in which their chips reside, and a supply chain of power producers, contractors and other specialists that underpin the globe-spanning AI build-out.
“We joke internally that we’re all Nvidia analysts now,” said David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.
The irony is that investors have tended to sell Nvidia stock immediately after blockbuster earnings, with shares falling each trading session after its four past quarterly reports. Some are betting that will be the case this time around, too.
The options market is pricing in a 5.3% swing, higher or lower, in Nvidia shares during the session following earnings, according to Option Research & Technology Services. That is higher than the 4.8% average move in Nvidia’s stock over the last 12 months after the company reports quarterly results.
In recent days, some of the most actively traded Nvidia options have been put contracts tied to the stock falling from its Friday value of $214.75 to $205 and $210 apiece, according to Cboe Global Markets data. Put options give the right to sell a stock by a set price and typically represent a bearish wager.
Many analysts remain optimistic. Frank Lee, global head of tech hardware and semiconductor research at HSBC Global Investment Research, recently raised his price target for Nvidia shares to $360 from $325, citing, among other things, Nvidia’s strategic partnerships with suppliers and its role as a top contributor to open-source AI.
