By Adam Clark
Nvidia Stock was rising early Tuesday, with the chip maker seen as one of the chief beneficiaries of the funding flowing into Elon Musk's artificial-intelligence start-up.
Nvidia shares were up 5.2% at $1,119.76 in early trading. The stock closed up 2.6% on Friday, ahead of the Memorial Day weekend.
Musk's xAI said it raised $6 billion in its latest venture round on Sunday. The funding brings the valuation of the year-old start-up to $24 billion.
For Nvidia to continue its astonishing rate of growth, it needs the AI competition to keep going and xAI's funding is a positive sign for the sector. Importantly, xAI hasn't talked about developing in-house chips, unlike Amazon.com, Google-parent Alphabet, Meta Platforms, and Microsoft, meaning plenty of that newly raised cash should be spent on Nvidia's hardware.
AI training budgets could increase tenfold every one-to-two years, according to Macquarie analyst Frederick Havemeyer.
"We think the AI investment cycle remains early...with a new inference infrastructure buildout similar to the scale of all datacenters globally once uptake is ubiquitous," Havemeyer wrote in a research note on Tuesday.
Musk's xAI partners with cloud-computing company Oracle for access to data centers and computing chips. Oracle recently signed a new cloud-computing infrastructure deal with Nvidia and said it plans to boost capital spending in the next fiscal year.
Musk has said xAI is planning to build a supercomputer to power the next version of its AI chatbot Grok, potentially partnering with Oracle to build a connected cluster of Nvidia chips at least four times bigger than the biggest equivalents today, technology-news focused outlet The Information reported over the weekend, citing a presentation made to investors.
Oracle and xAI didn't immediately respond to requests for comment.
Musk said he wants to get the proposed supercomputer running by the fall of 2025, as per the report, adding that xAI could partner with Oracle to develop the massive computer.
Among other chip makers, Advanced Micro Devices was up 0.6% and Intel was gaining 0.1% in morning trading.
Nvidia shares have risen 115% this year. That compares with a 11% increase in the S&P 500 index in 2024 and a 13% gain in the Nasdaq Composite Index.
Write to Adam Clark at adam.clark@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 28, 2024 10:02 ET (14:02 GMT)
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