Shares of Nvidia (NASDAQ: NVDA) rose higher on Tuesday, rising as much as 6.3%. At 1:59 PM ET, the stock was still up 5.8%, putting it back above the psychologically important $3 trillion market cap.
The catalyst that sent the chipmaker and artificial intelligence (AI) specialist soaring was word that the company was entering a significant new market that could drive future revenue.
A huge new market
Nvidia’s graphics processing units (GPUs) have become the gold standard and a key component in the rise of generative AI. These processors provide the computing power needed to accelerate the process of AI training and inference, which takes place primarily in data centers.
The company has signed a deal to transfer its AI expertise to telecom company Ooredoo in the Middle East, Qatar. The deal will provide its customers in Qatar, Algeria, Tunisia, Oman, Kuwait and the Maldives with “direct access” to Nvidia’s AI technology, according to a Reuters report.
The US government has placed limits on the technology Nvidia can export to Middle Eastern countries to prevent China from gaining access to its most advanced technology. The report suggests that Nvidia would comply with government mandates while playing a major role in supplying AI chips to the region.
The expansion of AI continues
The news comes in the wake of Nvidia’s latest financial report, which continues triple-digit revenue and profit growth. This, in turn, has fueled the rising stock price and the recent 10-to-1 stock split.
Some investors have expressed concern that the next phase of Nvidia’s growth could stall, and they wonder how far AI still has to go. However, most experts agree that AI adoption is still in its infancy. Generative AI will be a $1.3 trillion market by 2032, according to Bloomberg Intelligence estimates.
Furthermore, at around 35 times forward earnings, Nvidia shares are still fairly priced, especially in light of the continued opportunities presented by AI.
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Danny Vena has positions at Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Why Nvidia Stock Popped on Tuesday was originally published by The Motley Fool
