Nvidia's stellar result shifts focus to AI-linked stocks of Indian firms

Shares of Nvidia rose 16 per cent after its result, adding $277 billion in market cap to $1.96 trillion, making it the third-most valuable company in the US ahead of Amazon

Artificial intelligence (AI) titan Nvidia’s bumper results have put into focus domestic companies offering AI-linked services.

Shares of Happiest Minds Technologies, Tata Elxsi, Persistent Systems and L&T Technology Services (LLTS) posted sharp gains on Friday in an otherwise dull market.

Nasdaq-listed AI chip maker’s fourth quarter sales and profitability in the financial year beat Street’s elevated expectations, posting massive growth.

In its commentary, Nvidia said, “Strong demand was driven by enterprise software and consumer internet applications, as well as multiple industry verticals, including automotive, financial services and health care.”

Nvidia chief executive Jensen Huang said accelerated computing and generative AI have hit the tipping point.

Shares of Nvidia rose 16 per cent after its result, adding $277 billion in market cap to its $1.96 trillion, making it the third-most valuable company in the US, ahead of Amazon.

Most domestic stocks, however, came off from their day’s high as investors tried to cash in on the positive sentiment.

After gaining 4.2 per cent, Happiest Minds finished with a gain of 3.2 per cent,  LTTS ended 1.7 per cent higher, Persistent Systems rose 0.7 per cent and Tata Elxsi closed 0.3 per cent higher. All the stocks outperformed the Nifty IT index which fell 0.22 per cent.

Already, stocks in the AI space have seen a tremendous run over the past one year. According to a recent report by Morgan Stanley, AI-enablers gained $6 trillion of market cap globally in 2023.

The study of 2,500 companies across Asia and emerging markets (EMs) showed that Indian companies were among the top AI adopters.

Association of Southeast Asian Nations (Asean) (40 per cent), India (36 per cent) and Japan (35 per cent) have the highest shares, while Europe, the Middle East and Africa (EEMEA) (18 per cent), South Korea (23 per cent) and Australia (27 per cent) were lagging in AI adoption, the US-based brokerage said in a report.

Interestingly, Taiwan (10 per cent) was low on the AI adoption metric but its companies lead the global charts as AI enablers.

“AI-accelerated tech disruption will remain a central theme in 2024. AI enablers gained $6 trillion of market cap globally in 2023, but looking ahead, we see potential differentiation among AI adopters as models are deployed,” Daniel Blake, equity strategist at Morgan Stanley, said in a note.

Morgan Stanley says the largest AI beneficiaries will be in IT companies, communication services and financial sectors. In contrast, the real estate and materials sector lagged in AI adoption.

The Morgan Stanley survey also revealed that AI enablers and adopters have been the strongest performers in all regions.

However, companies in the Asia (ex-Japan) pack have lagged their peers in Japan and America.

Screen run by the brokerage on AI enablers and adopters in Asia and EM was dominated by Chinese, Taiwanese and South Korean companies. There was no Indian company, though.