Nvidia (NVDA +2.06%) stock just keeps rising. Today's jump of about 7% as of 1 p.m. ET wasn't due to any new information from the company. Nvidia released its quarterly earnings last week and the stock jumped on that news.
But today's move -- and the reason why Nvidia shares can keep moving higher -- comes from another company's announcement today. Nvidia's sales have been soaring, and now investors see another multibillion-dollar customer coming in Elon Musk's xAI.
How can Nvidia be worth so much?
Nvidia's stock took off when it started monetizing sales of its processors used for artificial intelligence (AI) applications. Sales of its GPUs continue to rise, with the company saying its sees revenue more than doubling in the current quarter compared to the year-ago period.
NASDAQ: NVDA
Key Data Points
Those sales are going to a wide range of technology companies building AI large language models and vastly increasing computing power. Last year, the top customers for Nvidia's GPU offering included many well-known companies.
Image source: Statista.
But while one Elon Musk company (Tesla) was on that list, another just announced it raised a fresh $6 billion in capital. And many expect much of the funds xAI just raised to be spent on Nvidia's processing chips.
xAI is Musk's start-up working to develop artificial intelligence. It just announced a new funding round this weekend that raised $6 billion and values the private company at about $24 billion, according to Musk. Reports have indicated that xAI plans to build a supercomputer to power a new version of xAI's chatbot named Grok. xAI may partner with Oracle using what could be tens of thousands of Nvidia chips.
With xAI not even making the top dozen customers for Nvidia's H100 GPUs in 2023, the news is making investors bullish that the backlog of demand for Nvidia's AI chips has a long tail. That's why the stock remains a buy even after its recent run to a record level.
