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Is ChatGPT driving Nvidia’s stock price higher?

The company has emerged as Wall Street’s preferred pick for traders looking to profit from the ChatGPT artificial intelligence tool.

Is ChatGPT driving Nvidia’s stock price higher?
Stock price has rallied over 26% over the last 1-month and over 52% over the 3-months period respectively.

The artificial intelligence (AI) tool ChatGPT – Chat Generative Pre-trained Transformer – is a chatbot released by OpenAI in November 2022. As the buzz around ChatGPT gained, the stock price of Nvidia Corporation, a $438.84B market cap company, has been on a roll. Listed on the Nasdaq stock exchange, Nvidia Corporation’s stock price is so far up by over 30% in 2023. Even though the NVDA stock price is down by over 17% over the last year, after touching a lifetime high price of around $313 in November 2021, the stock price has rallied over 26% over the last 1-month and over 52% over the 3-months period respectively.

But, what could be the correlation between ChatGPT and Nvidia stock price? Some analysts and investors are of the view that Nvidia Corp. has emerged as Wall Street’s preferred pick for traders looking to profit from the ChatGPT artificial intelligence tool’s potential in the weeks since it took the world by storm. The hype surrounding OpenAI’s chatbot, which demonstrated an uncanny ability to mimic human writing late last year, may be contributing to the gains.

The market leader in graphics processors for demanding processing operations required to power AI applications is Nvidia. As more individuals use ChatGPT, its owner OpenAI needs additional computing capacity to process the millions of questions.

Also Read: Why is the stock price of Amazon falling?

Nvidia is among the companies that stand to gain the most from the development of so-called generative AI, according to Bank of America Corp. According to Wells Fargo & Co., Nvidia’s forthcoming processors are well suited to capitalize on the higher compute demands put forth by AI models like ChatGPT. On the other side, it could be the most recent craze to sweep the IT sector just to fade away like orders from cryptocurrency miners, which have risen and fallen repeatedly over the past several years.

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The semiconductor manufacturer is known for graphics processing units, or GPUs, to improve the realism of video games. Now, it is being used increasingly in AI processors, supercomputers, data centres, and pharmaceutical research. The central processing units, or CPUs, created by other businesses are accelerated by Nvidia’s GPUs.

Despite the NVDA stock price decline in 2022, the company is still among the most expensive in the Nasdaq 100, with a price that is significantly higher than the market average over the past ten years and nearly 41 times the profit expected over the next 12 months.

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First published on: 24-01-2023 at 19:27 IST