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Despite the US debt ceiling deal controversy, tech investors are now buying, and this is evident in stock market indices. The “Nasdaq Composite” closed Friday with a fifth consecutive weekly gain; It has jumped 2.5% in the past five days and is now up 24% this year, far outperforming other major US indices.
The S&P500 is up 9.5% this year, and the Dow Jones Industrial Average is down slightly.
Excitement surrounding the earnings report of the chipmaker Nvidia and its leadership in artificial intelligence technology led to the rally this week, but investors also snapped up shares of Microsoft, Meta, and Alphabet. And each of these companies has its own story with artificial intelligence.
With a debt ceiling deal struck and the Federal Reserve possibly slowing the pace of interest rate hikes, the stock market this year is starting to look less like 2022 and more like the previous decade, when technology was in good shape. The potential in artificial intelligence cannot be denied, nor is the profit power of these companies.
Proof of capabilities
As the year began, the main theme in the technology sector was to reduce the number of workers and reduce costs. Many of its largest companies, including Meta, Alphabet, Amazon and Microsoft, have cut thousands of jobs after a dismal 2022 of revenue growth and stock prices.
In the earnings reports, the efficiency of these companies was confirmed, and their ability to do more with less resources, which was echoed by the Wall Street audience.
Investors’ focus has now shifted to AI; These companies offer “real-world applications” of the technology they have long touted.
OpenAI exploded after the launch of ChatGPT last year, and its biggest investor is Microsoft, which is embedding this core technology in as many products as possible.
At the same time, Google promotes its competing artificial intelligence model at every opportunity, and Mark Zuckerberg, CEO of Meta, prefers to “tell shareholders about his company’s advances in artificial intelligence rather than mention its money-sapping Metaverse efforts.”
NVIDIA and others
Chipmaker Nvidia, best known for the graphics processing units that power advanced video games, is now catching up with artificial intelligence. The stock rose 25% this week to a record high, pushing the company’s market value to nearly $1 trillion, after earnings topped the quarter. I estimates.
So far this year, Nvidia shares are up 167%, leading all companies on the S&P500 index, followed by three gainers; They are Meta, Advanced Micro Devices, Salesforce.
And the strength of «Nvidia» is based on what is to come. Its revenue in the fourth quarter decreased by 13% from the previous year, due to a decrease of 38% in the gaming division.
But the company’s sales forecast for the current quarter was nearly 50% higher than Wall Street estimates; As it is witnessing an increasing demand for its products related to data centers.
“Cloud vendors and Internet companies are buying GPU chips and using the processors to train and deploy generative AI applications such as ChatGPT,” the company said.
Microsoft stock is up 4.6% this week and is now up 39% from the start of the year.
Meta gained 6.7% for the week and has more than doubled this year 2023, after losing nearly two-thirds of its value last year. Alphabet stock is up 1.5% this week, bringing its year-to-date gain to 41%.
Federal position
One of the biggest drags on tech stocks in the past year has been the central bank’s continued rate hikes. The increases continued through 2023; The target range for federal funds rose to 5% -5.25% in early May.
But at the Fed’s last meeting, some members indicated that they expected “a slower economic growth to offset the need for further tightening”; According to minutes issued Wednesday.
Less hawkish monetary policy is seen as a bull market signal for technology and other riskier assets, which typically outperform in a more stable rate environment.
However, some investors worry that the tech boom has gone too far given the vulnerabilities that still exist in the economy and government.
US Treasury Secretary Janet Yellen said later Friday that the United States would likely have sufficient reserves to delay until June 5 the occurrence of a debt default.
