Nvidia Stock (NVDA) and Other Chip Stocks Surge as AI Spending increases

Nvidia stock (NVDA) reached a record close on Monday as AI hardware stocks continue their upward momentum, driven by strong investor enthusiasm for the growing demand in artificial intelligence.

Nvidia's shares surge

Nvidia's shares have risen 8% over the past week, bringing the company closer to challenging Apple (AAPL) as the most valuable company on Wall Street. The surge follows recent remarks from CEO Jensen Huang and Nvidia's partners, emphasizing the soaring demand for the company’s AI chips, which are crucial for powering advanced AI applications.

In an interview with CNBC on Wednesday after the market close, CEO Jensen Huang confirmed that the chips are now in "full production," despite earlier design issues that led to some delays in customer rollouts. This strong demand highlights the critical role Nvidia's new chips will play in the rapidly growing AI sector.

"Blackwell is as planned," Huang said. "Everybody wants to have the most and everybody wants to be first."

Blackwell delays have caused concern for investors, with many looking to the rollout as the next big catalyst for the chipmaker after a recent stock slump fueled by a mid-July sell-off from the unwinding of the yen carry trade.

Other AI chip stocks performance

Other AI chip and hardware stocks, including Arm (ARM), Qualcomm (QCOM), Broadcom (AVGO), Super Micro Computer (SMCI), Astera Labs (ALAB), and Micron (MU), have also seen gains as each company has reported strong demand for their products, driven by the ongoing AI boom. Taiwan Semiconductor Manufacturing Company (TSMC) (TSM) joined the rally, closing at a record high on Monday.

The upward trend in AI chip stocks signals strong confidence in continued AI hardware spending, easing Wall Street's concerns about a potential slowdown in investment.

Goldman Sachs analysts noted in their October 10 report: "While Phase 2 stocks [AI infrastructure-related stocks like Arm, TSMC, and SMCI] may appear somewhat expensive compared to historical valuations, the growing demand for AI could lead mega-cap tech companies to increase their AI-related capital expenditures beyond current investor and analyst expectations."

Tech giants like Google (GOOG), Microsoft (MSFT), Amazon (AMZN), and Meta (META) have all signaled plans to maintain substantial investments in AI infrastructure through 2025. According to Goldman Sachs, these megacap tech companies are projected to spend $215 billion on AI capital expenditures in 2024, rising to $250 billion in 2025, which would significantly benefit AI hardware suppliers, especially Nvidia.

In addition, OpenAI's recent $6.6 billion funding round is expected to funnel more cash into hardware companies, particularly Nvidia, as it continues to develop and refine its AI models.