What the meteoric rise of Nvidia shares says about the future of the economy

• Nvidia posted huge fourth-quarter results on Tuesday, up 265% from a year earlier, sparking the biggest one-day rally the market has ever seen.
• Investors are flocking to Nvidia, believing the company has the potential to drive a new wave of technological innovation that could boost productivity across the economy through faster computers and artificial intelligence.
• “Nvidia has already made progress in increasing efficiency, which is a huge advantage in this regard due to the large volume of calculations that must be performed to make a technology like AI possible,” EJ Antoni, Grover M researcher at the Heritage Foundation. Hermann Center for the Federal Press, told the Daily Caller News Foundation. “Being at the forefront of chip technology puts a company in a position to really dominate the market.”

US technology company Nvidia has surged in value in recent years following speculation about the potential economic impact of new computer technology that some investors believe could substantially boost productivity.

Nvidia posted huge year-end quarterly profits on Tuesday evening, up 265% from a year earlier, as the company continues to grow at breakneck speed. seconds to the company's fourth quarter results. Fourth-quarter earnings beat expectations and led to a rally in stocks to $277 billion on Wednesday, up 16.3% in just one day, making it the biggest one-day gain in the history of the New York Stock Exchange. seconds to Reuters.

Investor hype around Nvidia is due to its stake in the semiconductor market, where it commands a large majority of market share in technologies related to artificial intelligence (AI), experts told the Daily Caller News Foundation. Many investors predict that AI and greater IT efficiency will be a boon for businesses, which could greatly increase productivity by using the technology for a wide range of applications.

“Nvidia has already made progress in increasing efficiency, which is a huge advantage in this regard due to the large volume of calculations that must be performed to make a technology like AI possible,” EJ Antoni, Grover M researcher at the Heritage Foundation. The Hermann Center for the Federal Budget told the DCNF. “With the ability to position data centers virtually anywhere, size is no longer a major issue for chips, but efficiency is due to rising energy prices and environmental regulations. Being in the cutting edge of chip technology puts a company in a position to really dominate the market.”

Nvidia was first founded in 1993, introducing products related to 3D graphics, especially for gaming and multimedia creation, and later invented the graphics processing unit in 1999, giving a big step for computing power . seconds on the company's website. The company also claims to have ushered in the era of modern AI in 2012, way ahead of trends around the technology, giving it a significant lead over other tech companies now looking to catch up and expand. se to the AI.

“Nvidia controls the majority (roughly four-fifths) of the chip market for AI-related technologies,” Antoni told the DCNF. “The explosion in demand around AI has also increased demand for chips, leading to growth forecasts for Nvidia that were completely off the table just a couple of years ago. Like all chip prices stocks, no one can say for sure whether Nvidia's current popularity is justified because stock prices are speculations about future earnings and the future is, by definition, uncertain. This is especially true for AI, where large unknowns part of the potential”.

Nvidia's stock price has exploded over the past few years, measuring under $40 per share in early 2019, peaking at more than $310 per share in November 2021, before falling to around $127 per share. per share in October 2022, and finally rose to around $800 per share in February 2024, seconds on MarketWatch.

Nvidia breaks stock market record with $247 billion in market capitalization in one day, Bloomberg reports.

Known for AI and fast computing, #Nvidia reaches a major financial milestone with its impressive earnings.

It appears almost 280% last year!#AI #Crypto #Stocks pic.twitter.com/Qv9aQ3LP14

— Christian (@ChristiaanDefi) February 23, 2024

“The fact that the demand for these products is growing tells me that our society, these companies, educational organizations, all the different users of AI believe that there is great value here that can improve our lives.” David Inserra, Free Expression and Technology Fellow at the Cato Institute, told the DCNF. “I can't predict that that will certainly be the case. But all the indicators we have are that the market is saying there's great value here. I think it would be foolish to ignore this important market indicator.”

Generative AI powered by the kind of technology Nvidia is leading the way is already finding a number of applications in business despite being in its infancy, including customer service, cybersecurity, personal assistants, inventory management, accounting and more . seconds in Forbes. The United States is also looking to use semiconductor technology and AI military applications and is trying to block China's access to the equipment to maintain a technological and militaristic edge.

US companies controlled about 48% of the market share in the semiconductor market by 2022, compared to 7% in China, seconds in Statista South Korea controlled the second market share with 19%, followed by Japan and the European Union with 9%.

The Biden administration has placed a series of restrictions on the semiconductor industry to ensure continued American supremacy, including the imposition of sanctions on several Chinese chipmakers in October 2022 to prevent them from working with American companies. Congress has done it too approved $39 billion in direct funding for chipmakers as part of the August 2022 Chip and Science Act.

The deployment of the funds has done so so far failed bring a substantial number of chip manufacturing plants up and running, with several companies pushing back new plant completion dates to 2025 or later due to chip price volatility and uncertain government funding.

The growth of generative AI powered by new chips has also led to concerns that technology is being given a liberal bent, such as Google's Gemini AI chatbot taking a nuanced stance on the terrorist organization Hamas' stance on the violent eradication of Israel and whether China is committing a genocide against the Uighur people.

Nvidia is part of what has been dubbed the Magnificent Seven Stocks, which are stocks that have driven much of the stock's growth in recent years. seconds on Yahoo Finance. Tesla, an electric vehicle (EV) company, has had a similar meteoric rise starting a little earlier, but has since remained relatively stagnant in 2024 as other competitors in the EV field emerge, which has raised concerns that Nvidia is not living up to expectations.

“This is always the dynamics of the market, isn't it? If someone comes along and offers a more desirable product, then yes, of course,” Inserra told DCNF about the potential for Nvidia to lose its current investor hype. “We're talking a lot about AI right now, but what if does a new type of AI emerge, a better or even more advanced type, a better type of technology and uses different types of computing power? We don't know what the future of innovation may bring. So to this point, yes, Nvidia may not be the golden child of this forever, but from what I've read, it looks like they've been leaning forward and looking for ways to move into new spaces. in using their processors for artificial intelligence, and so they have that power right now.”

Nvidia declined to comment to the DCNF.

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