- AI chipmaker’s value vies with Apple
- Q1 trading activity up 50%
- Revenue up 262% in a year
Retail investors in the UAE have significantly ramped up their holdings in Nvidia.
Trading activity in the emirates for the semiconductor leader’s stock jumped 50 percent in the first quarter of the year, according to data from a global trading and investment platform.
Once known primarily for graphics processing units used in gaming, cryptocurrency mining and automotive systems, Nvidia now dominates the market for AI chips.
Its high-performance components are critical to the artificial intelligence boom, powering applications such as OpenAI’s ChatGPT.
The demand for these chips, driven by tech giants including Google, Meta, Microsoft, Amazon and Tesla, sent Nvidia’s stock soaring to nearly $1,000 in May, up from $492 in January and from $148 in the same month a year ago.
The meteoric ascent caused analysts to raise concerns about the sustainability of its rally ahead of its latest earnings call.
Despite this, Ben Laidler, global markets strategist at eToro, noted a 20 percent increase in buying activity among UAE investors in the 48 hours leading up to Nvidia’s quarterly results.
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In late May Nvidia reported quarterly revenue of $26 billion, up 18 percent from the previous quarter and a staggering 262 percent from a year ago.
“Nvidia has seen the strongest growth of holders, frankly over any time period you want to look at this year and over the last quarter,” Laidler told AGBI.
“This trend started three or four months ago and has continued through the results and after because we have yet another beat on expectations and a raise of forecasts.”
This buying spree persisted even as the company’s share price surpassed the $1,000 mark, Laidler said.
eToroLast week Nvidia’s market value crossed $3 trillion, overtaking Apple to become the world’s second-most valuable company, behind only Microsoft. After its latest AI announcements Apple reclaimed its position in the top two.
Nvidia’s rally also spurred buying activity in other AI stocks, Laidler said.
Advanced Micro Devices, for instance, saw a 10 percent increase in the number of Gulf investors, making it the 12th most-owned stock among them.
Nvidia is the fifth most-owned stock among UAE investors on the eToro platform, with other top risers including Taiwan Semiconductor, Adobe, Intel and Microsoft.
AI stock trading among UAE investors mirrors a global trend but at a higher adoption rate in the Gulf, according to Laidler.
An April study by eToro of 1,000 retail investors in the UAE found that 70 percent hold stocks in AI-related businesses, compared to 60 percent globally.
Licensed by the Abu Dhabi Global Market’s Financial Services Regulatory Authority, eToro serves 3 percent of its 35 million users from the Gulf, primarily based in the UAE and excluding Saudi Arabia.
Laidler attributes the increased activity in AI stocks to a younger, tech-savvy demographic in the region.
“They understand the technology and are more risk-tolerant because they are not retiring for another 30 or 40 years, so they can stomach volatility,” he said, noting that retail investors have outperformed institutional investors in tech investments over the past two years.
Vijay Valecha, chief investment officer at Century Financial in Dubai, added that AI investments are more than just hype.
“Investments in AI, automation and technology have historically helped companies generate greater revenues and increase shareholder value,” he said.
“During economic booms AI technology can help companies earn higher revenues, and during economic downturns it can help companies cut down on inefficiencies.
“As long as investment into AI continues and Nvidia remains ahead of other chip makers, the company will continue to reap benefits.”
Nvidia expects revenue for the current quarter to increase 107 percent from the same time last year – slightly down on recent figures.
The company has announced a 10-for-one forward stock split of Nvidia’s issued common stock to make ownership more accessible to employees and investors. This means investors will receive nine additional shares for each one they already own.
It also raised its quarterly cash dividend by 150 percent to $0.01 per share on a post-split basis.
“The next industrial revolution has begun,” Jensen Huang, founder and CEO of Nvidia, said on the May earnings call.
“AI will bring significant productivity gains to nearly every industry and help companies be more cost and energy efficient, while expanding revenue opportunities.”
Laidler warned, however, “if you are focused on one or two stocks, you’re setting yourself up for gut-wrenching volatility and potential losses. Diversification is the only free lunch in finance”.
High returns
A $1,000 investment in Nvidia in January 2024 would have returned about 155 percent, or $1,550, making your investment worth $2,550 on June 6.
A $1,000 investment in Nvidia in January 2020 would have returned about 1,992 percent, or $19,917, making your investment worth $20,917 on June 6.
A $1,000 investment in Nvidia in January 2014 would have returned about 31,275 percent, or $312,375, making your investment worth $313,375 on June 6.