Stocks Around the World Are Swept Up in AI Rally

What You Need to Know

The most-valuable chipmaker rose close to 15% and is on course to add $230 billion or more to its market capitalization.
“Few things are more certain than death, taxes, and Nvidia beats on earnings,” said Ryan Detrick of Carson Group.
U.S. equities are poised to power ahead over the next two to three weeks, according to Chris Senyek at Wolfe Research.

The stock rally powered ahead as Nvidia Corp.’s bullish outlook rekindled the artificial-intelligence mania and data showed the world’s largest economy is still going strong.

From the U.S. to Europe and Japan, equities hit all-time highs, with the most-valuable chipmaker 15% and on course to add $230 billion or more to its market capitalization.

That would be the biggest single-session increase in value ever — eclipsing a $197 billion gain made by Meta Platforms Inc.

With the numbers now in, bulls are calculating its new price-to-earnings ratio, or how much investors are paying for future growth. Put another way, Nvidia’s earnings have been growing faster than its shares.

“Nvidia got to where it is because of extremely strong earnings and revenue,” said James Demmert, chief investment officer at Main Street Research. “When a company posts 265% year-over-year revenue growth — like Nvidia did — it deserves a premium valuation.”

The Nasdaq 100 added nearly 3% as of 2:20 p.m. in New York, while the S&P 500 climbed the most since November. The $15 billion VanEck Semiconductor ETF (SMH) jumped 7%.

Equities were also buoyed by solid manufacturing, housing and labor-market data, with traders taking more hawkish Fedspeak in stride. Treasury 10-year yields were little changed at 4.32%.

“Few things are more certain than death, taxes, and Nvidia beats on earnings,” said Ryan Detrick at Carson Group. “The bar was set quite high, and incredibly they’ve once again stepped up and hit a home run.”

Demmert says that for investors who already own Nvidia, the recommendation would be to hold the stock and avoid selling in order to capture future expected growth “as we are still early in this transformative AI technology.”

“For investors who don’t own the stock, we would be buying on any weakness,” he noted. “With Nvidia’s stock, there will be corrections and bumps along the way, but the stock will continue to climb the wall of worry.”