Nvidia shares surged 15 percent on Wednesday, extending a rally ignited by optimism about its ARM-based mobile chip business and a $1.5 billion legal settlement with Intel Corp.
The jump in Nvidia's stock brought its gain in January to 52 percent as investors bet on the Santa Clara, California company's new Tegra 2 dual-core mobile chips.
Wedbush analyst Patrick Wang has been fielding calls from clients and helping them estimate how large an impact Nvidia's mobile chips could make on the mobile market, where competition from Qualcomm Inc and eventually Intel is expected to increase.
The stock is trading purely on momentum at this point, Wang said.
He estimated Nvidia, which faced delays in launching its Tegra chips, could gain a 30 percent share of the market for tablets and smartphones two years from now.
Micron technology Inc shares jumped 7.1 percent to $9.34 after investor-relations vice president Kipp Bedard told investors at a Needham & Company conference that a downturn in prices for DRAM memory chips was recovering quickly.
PUSH INTO MOBILE
Nvidia made its name designing high-end graphics chips for PCs. But facing increased competition in that market from Advanced Micro Devices Inc and Intel, company co-founder and Chief Executive Jen-Hsun Huang has pushed into mobile, combining central processors based on ARM Holdings Plc architecture with Nvidia's own graphics technology.
Wednesday's stock leap was Nvidia's largest in a single session since October 2008, and its shares have doubled since October 2010.
Interest in the options market was high in Nvidia as well, with more than 29,000 call options with a January strike price of $22.50 trading on Wednesday, according to Caitlin Duffy, equity options analyst at Interactive Brokers.
The majority of the calls traded on the ask, indicating buyers are dominating volume at that strike today, said Duffy. Heavy activity was also seen at the $24 and $25 strike prices, she said. Nvidia's shares closed at $23.35.
Intel said earlier this week it would pay Nvidia $1.5 billion to license its patents, settling a legal dispute and validating Nvidia's focus on graphics technology.
And at last week's Consumer Electronics Show, or CES, Nvidia said it was developing an ARM-based PC central processor under the code name Project Denver, directly challenging Intel in its own traditional market.
Adding to upheaval in the semiconductor industry, Advanced Micro Devices Inc's chief executive, Dirk Meyer, left the company this week due in part to the company's lack of a mobile strategy.
People are digesting the Intel settlement, digesting CES ... Their primary competitor (AMD) just got a lot weaker, said Alex Gauna, an analyst at JMP Securities. Micron makes NAND flash memory used in smartphone and tablets.
At the Las Vegas trade show last week, Motorola, LG, Dell, Acer, Asus and Toshiba Corp announced or showed off smartphones and tablets using Tegra chips.
(Additional reporting by David Gaffen in New York; Editing by Andre Grenon and Steve Orlofsky)