Nvidia's 24% jump Thursday lit an AI fire that carried these 19 stocks to gains of as much as 17%

By Philip van Doorn

Nvidia's forecast of a 50% increase in sales caused euphoria as investors looked to jump aboard the artificial-intelligence bandwagon

Nvidia Corp. did something remarkable to set up a rally for its stock on Thursday, while lifting shares of other companies involved in new technology employing artificial intelligence.

Nvidia's (NVDA) big splash was to predict a 50% sequential increase in quarterly sales, with CEO Jensen Huang tying that expectation to a "killer app," a term he now applies to the company's graphics processing units (GPUs) used in data centers that support companies' efforts to roll out their new AI-enabled products and services.

In an interview with Therese Poletti, Nvidia CFO Colette Kress explained how "the inflection on AI and accelerated computing" helped drive the company's revenue forecast.

The company's stock rose 24% on Thursday, when the S&P 500 was lifted nearly 1%. A list of Thursday's 20 strongest performers in the benchmark index is below -- it is dominated by tech stocks showing gains of 5% or more for the session.

The action propelled several AI-themed exchange-traded funds.

Nvidia appears to be "pricey" even to analysts who love the stock, with a forward price-to-earnings ratio of more than 50. But the type of growth the company expects is always expensive, and a stock such as Amazon.com Inc. (AMZN), which has been such a strong performer for so long, has traded at an average forward P/E ratio of 67.5 over the past 10 years.

Click here for a closer look at Nvidia's price ratios, the heavy weighting for its stock and other major AI players such as Microsoft (MSFT) and Alphabet (GOOGL)(GOOGL) in the S&P 500 and the Russell 1000 Growth Index and other ways to play the AI trend.

The Ratings Game:

In an interview, Ken Laudan of Buffalo Funds cautioned that any discussion of AI as an investment theme needed to encompass "regulations and boundaries," because the new technology "has a potential to get out of hand."

In a blog post Thursday, Microsoft Corp. President Brad Smith wrote that the federal government should create a new agency to oversee the deployment of the new technology to "ensure that AI remains under human control."

Here are the 20 best performers among the S&P 500 on Thursday -- most are in the technology sector, and the two real-estate investment trusts on the list own data centers:

Company                        Industry                       Ticker  May 25 price change  2023 price change  2022 price change  Forward P/E 
Nvidia Corp.                   Semiconductors                  NVDA                   24%               160%               -50%         50.1 
Monolithic Power Systems Inc.  Semiconductors                  MPWR                   17%                38%               -28%         38.4 
Advanced Micro Devices Inc.    Semiconductors                  AMD                    11%                86%               -55%         35.8 
Arista Networks Inc.           Computer Peripherals            ANET                   11%                29%               -16%         25.3 
Cadence Design Systems Inc.    Software                        CDNS                   10%                40%               -14%         41.9 
Synopsys Inc.                  Software                        SNPS                   10%                36%               -13%         37.5 
Broadcom Inc.                  Semiconductors                  AVGO                    7%                30%               -16%         16.6 
Adobe Inc.                     Software                        ADBE                    7%                17%               -41%         23.8 
Applied Materials Inc.         Industrial Machinery            AMAT                    7%                34%               -38%         18.1 
Dish Network Corp. Class A     Cable/ Satellite TV             DISH                    7%               -52%               -57%          8.5 
Digital Realty Trust Inc.      Real-Estate Investment Trusts   DLR                     7%                -8%               -43%         84.6 
Lam Research Corp.             Industrial Machinery            LRCX                    6%                43%               -42%         22.8 
KLA Corp.                      Semiconductors                  KLAC                    6%                15%               -12%         21.2 
Oracle Corp.                   Software                        ORCL                    6%                28%                -6%         18.4 
ServiceNow Inc.                Software                        NOW                     6%                37%               -40%         51.0 
Ralph Lauren Corp. Class A     Apparel/ Footwear                RL                     5%                 8%               -11%         12.0 
Eaton Corp. PLC                Electrical Products             ETN                     5%                13%                -9%         20.0 
MetLife Inc.                   Multi-Line Insurance            MET                     5%               -27%                16%          6.2 
Equinix Inc.                   Real-Estate Investment Trusts   EQIX                    5%                 8%               -23%         74.4 
Micron Technology Inc.         Semiconductors                   MU                     5%                39%               -46%          N/A 
                                                                                                                             Source: FactSet 

Click on the tickers for more about each company.

Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page.

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-Philip van Doorn

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05-26-23 0633ET

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