(Bloomberg) — A bullish outlook for Nvidia Inc. reignited artificial intelligence mania and fueled a global stock rally as data showed the world's largest economy remained strong.
Most Read Articles on Bloomberg
Stocks from the U.S. to Europe to Japan hit all-time highs, with the most valuable chipmaker gaining 16% and adding $277 billion to its market capitalization. This is the largest increase in value in a single session ever, surpassing the $197 billion profit made by Meta Platforms. Bulls are using these numbers to calculate Nvidia's new price-to-earnings ratio, or how much investors are paying for future growth. In other words, the company's profits are growing faster than its stock price.
“NVIDIA's growth has been driven by very strong revenue and earnings,” said James Demmert, chief investment officer at Main Street Research. “When a company has 265% year-over-year revenue growth, like NVIDIA, it deserves a premium valuation.”
The MSCI ACWI index, which combines both developed and emerging market stocks, rose to an all-time high. The Nasdaq 100 rose 3%, and the S&P 500 rose by the most since January 2023. The $16 billion VanEck Semiconductor ETF (SMH) rose 6.8%. Advanced Micro Devices and Broadcom, two other chipmakers expected to benefit from AI growth, set new records. Super microcomputers, popular with investors looking to get exposure to innovative technology, soared 33%.
Traders kept pace with a more hawkish FedSpeak, and stocks also rose on solid readings in manufacturing, housing and the labor market. The yield on 10-year government bonds remained almost unchanged at 4.32%.
“There are few things that are more certain than death, taxes and Nvidia outperforming in earnings,” said Ryan Detrick of Carson Group. “The bar was set pretty high, but unbelievably, they stepped up again and hit a home run.”
Nvidia's market cap has increased by more than $700 billion this year and is now worth more than $1.9 trillion. Investors are betting the company will remain the biggest beneficiary of the AI computing boom.
Companies such as Amazon.com Inc., Meta Platforms, Microsoft Corp. and Alphabet Inc.'s Google are fast investing in hardware for AI computing and are Nvidia's biggest customers, accounting for 40% of its revenue. It accounts for close to %.
“Demand for AI is rapidly increasing across companies, industries and countries around the world,” said Tom Hulick of Strategy Asset Managers. “We own NVDA and continue to hold the company. This is an exciting momentum play that we have been promoting and participating in for several years.”
Main Street Research's Demmert recommends it for investors who already own Nvidia because it is “still in the early stages of this innovative AI technology” to capture expected future growth. The goal is to hold stocks and avoid selling them.
“For investors who don't own the stock, it's going to be buying on the weak side,” he said. “There will be corrections and ups and downs for Nvidia's stock price along the way, but the stock will continue to climb the wall of uncertainty.”
Nvidia's results were a relief to AI bulls as expectations improved significantly, said Solita Marcelli of UBS Global Wealth Management. Despite the industry's rapid growth, she sees technology stocks, especially those that benefit from her AI revolution, likely to rise further.
“The short-term momentum in AI stocks is likely to continue,” Marcelli said. “For our positioning, we continue to prioritize semiconductors and software, and see opportunities in AI edge computing, big tech, and the beneficiaries of their partners.”
Nvidia's blockbuster results also highlighted its technology advantage over the rest of the stock market, with the mega-cap “Magnificent Seven” group leading the rally.
U.S. stocks are poised to rise over the next two to three weeks, with AI-powered stocks, most of the Mag 7, and momentum themes leading the way, according to Wolf Research's Chris Seniek. It is said that there is.
“If the stock market moves more than ever this year, we still think it's going to be important to be even broader than this year,” said Matt Maley of Miller Tabak + Company. “What we are saying is that even though the tech sector is the most important for the stock market at the moment, there are still plenty of opportunities in other sectors of the market.”
The rise in tech stocks has pushed the Nasdaq 100's valuation higher than in previous years, as has the S&P 500. Higher valuations could ultimately limit further growth as investors consider how much they are willing to pay for stocks with future value.
Still, Citigroup strategist Scott Kronert recently said that the index's price-to-earnings ratio measurements can be misleading because 40% of the S&P 500 trades off with other indexes. . He predicted that even with the US benchmark trading at 20 times forward P/E, more stocks could be revalued, and that's exactly what happened.
Meanwhile, demand for options to protect against short-term declines in the Nasdaq 100 is receding from near its highest in months before Nvidia's earnings release.
The implied volatility premium (known as skew) for one-month puts over calls in the Invesco QQQ Trust Series 1 ETF rose to about 3.5 points this week, the highest level since November. Concerns centered on short-term options markets, where the gap between one-month and three-month skews widened again after hitting its narrowest level since April 2022.
Company highlights:
-
AT&T Inc. said Thursday its mobile network was restored after widespread, hours-long outages as the FBI and Department of Homeland Security began investigating what caused hundreds of thousands of wireless subscribers to lose service. announced.
-
Reddit Inc. has filed for an initial public offering, seeing revenue growth and helping fuel a resurgence in its still-weak U.S. listing.
-
AbbVie on Thursday sold about $15 billion in bonds in the U.S. investment-grade market to finance its acquisitions of Immunogen and Cebel Therapeutics Holdings, adding to a recent surge in acquisition financing. ing.
-
Space exploration startup Intuitive Machines will on Thursday attempt to land the first intact American lander on the moon in more than 50 years.
-
Electric vehicle maker Rivian Automotive released disappointing production forecasts and announced further job cuts.
-
Moderna Inc. reported fourth-quarter sales that beat analysts' expectations, gaining market share for its coronavirus vaccine over rival Pfizer Inc.
-
Newmont, the world's top gold producer, plans to sell six mines and two projects in a series of sales aimed at generating $2 billion in cash.
-
Ride-hailing company Grab Holdings Inc. expects 2024 revenue to be lower than analysts expected, suggesting its core online business is slowing more than expected.
This week's main events:
-
Chinese real estate prices Friday
-
Germany IFO Business Environment, GDP, Friday
-
ECB releases one-year and three-year inflation expectations survey on Friday
The main movements in the market are:
stock
-
As of 4 p.m. New York time, the S&P 500 was up 2.1%.
-
Nasdaq 100 rises 3%
-
The Dow Jones Industrial Average rose 1.2%.
-
MSCI World Index rose 1.7%
currency
-
Bloomberg Dollar Spot Index little changed
-
The euro was almost unchanged at $1.0821.
-
The British pound rose 0.2% to $1.2661.
-
The Japanese yen fell 0.1% to 150.51 yen to the dollar.
cryptocurrency
-
Bitcoin rises 1.1% to $51,928.73
-
Ether rose 2.8% to $3,009.41.
bond
-
The 10-year government bond yield was almost unchanged at 4.32%.
-
Germany's 10-year bond yield fell 1 basis point to 2.44%.
-
UK 10-year bond yields were little changed at 4.11%.
merchandise
This article was produced in partnership with Bloomberg Automation.
–With assistance from Subrat Patnaik, Carmen Reinicke, Ryan Vlastelica, Carly Wanna, Farah Elbahrawy, and Thyagaraju Adinarayan.
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP