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Nvidia proves AI enthusiasm is here to stay

Nvidia shares hit fresh record highs overnight as investors continued to position for greater AI adoption.

There have been periods in 2024 when investors would have been forgiven for thinking the hype around AI was starting to fade. We have seen big sell-offs as people question the valuations of the ‘Magnificent 7’ technology stocks at the forefront of AI innovation.

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However, these sell-offs have consistently been bought into by investors prepared to take the long view on AI and ride out any gyrations in the companies with Generative AI running through their veins.

Indeed, Nvidia’s 7% rally overnight, which took the stock to fresh record highs, demonstrates investor willingness to disregard current valuations and focus on their view of a world with AI deeply integrated into everyday life.

Should we reach such a point – and the smart money says we will – chip makers like Nvidia are going to be among the big winners. Strong results released last week shows the AI boom in much more than the latest hot topic for the media to jump on. Far from that, Nvidia is producing extraordinary revenue growth primarily on soaring demand from AI applications.

Dan Coatsworth, investment analyst at AJ Bell, explains, “The stock has been bid up to a new record high potentially because the latest messages from the company contain all the right notes that investors want to hear. The business is doing incredibly well, there are so many opportunities to keep growing, and the AI theme still has legs. When the song is that catchy, investors want to keep humming it all day long.”

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Nvidia’s journey from a computer games graphics card maker to an Artificial Intelligence behemoth could well still be in its infancy.  

“As we are still believed to be in the early stages of the adoption of artificial intelligence, enthusiasm about the potential ahead is helping maintain the AI rally, even though the trajectory of demand for the technologies is hard to map,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

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