What happened

Shares of Nvidia (NVDA -0.62%) surged higher Tuesday morning, jumping as much as 5.5%. As of 12:52 p.m. ET, the stock was still up 5.1%.

While the broader market rally no doubt helped fuel the rise, the catalyst that appeared to propel the semiconductor specialist higher was news about a collaboration with another tech giant and why it represents a compelling opportunity.

So what

In a blog post that dropped late yesterday, Microsoft (MSFT 0.09%) unveiled details about its work with artificial intelligence (AI) start-up OpenAI to develop viral chatbot ChatGPT -- which attracted more than 1 million users within days of its debut in November. The two companies partnered to build a massive, state-of-the-art supercomputer with an eye toward this new generative pre-trained transformer (GPT) -- a system designed to train a large language model capable of intelligently responding to user questions. 

Microsoft said it strung together thousands of Nvidia AI-optimized graphics processing units (GPUs) to generate the computing power necessary to run these increasingly large and complex AI models.

"One of the things we had learned from research is that the larger the model, the more data you have and the longer you can train, the better the accuracy of the model is," said Nidhi Chappell, Microsoft head of product for Azure high-performance computing and AI. "So, there was definitely a strong push to get bigger models trained for a longer period of time, which means not only do you need to have the biggest infrastructure, you have to be able to run it reliably for a long period of time."

Furthermore, Microsoft announced the launch of its "most powerful and massively scalable AI virtual machine series," built on Nvidia GPUs. 

Now what

The implication is clear. Even as the AI revolution continues, Nvidia GPUs are still the industry standard for training and running the largest, most complex AI models. Founder and CEO Jensen Huang recently stated: "AI is at an inflection point, setting up for broad adoption reaching into every industry. From start-ups to major enterprises, we are seeing accelerated interest in the versatility and capabilities of generative AI." 

As AI evolves, Nvidia GPUs will be there to push the boundaries of existing technology -- one of many reasons the stock is a buy.