Nandini Roy Choudhury, writer
Brief news
- Following the Federal Reserve’s interest rate cut, technology stocks surged, with the Nasdaq rising 2.5%, driven by significant gains in Tesla and Nvidia.
- Nvidia’s stock has increased 138% this year, benefiting from AI demand, while AMD and Broadcom also saw substantial gains.
- CEO Lisa Su emphasized the long-term nature of AI development, highlighting its potential across various sectors.
Detailed news
A day after the Federal Reserve reduced its standard interest rate for the first time since 2020, investors flocked to technology equities at one of the quickest rates of the year.
The Nasdaq experienced its fourth-strongest rally of 2024 on Thursday, with a 2.5% increase, driven by a 7.4% increase in Tesla shares and a 4% increase in Nvidia. The tech-heavy index experienced its largest annual increase on February 22, with a 3% increase.
Tech equities are generally favored by lower interest rates due to the increased appeal of risky wagers and the reduction in borrowing costs and bond yields. In addition to the central bank’s half-point reduction, the Federal Open Market Committee indicated through its “dot plot” the equivalent of 50 additional basis points of cuts by the end of the year, ultimately resulting in a 2 percentage point decrease beyond Wednesday’s move.
The Nasdaq has been steadily increasing this year, fueled by the enthusiasm surrounding artificial intelligence and Nvidia. However, Thursday’s rally propelled the benchmark to its highest level since mid-July. The Nasdaq reached its highest point on July 10 at 18,647.45, and it has since closed at 18,013.98, just 3.5% below that mark.
Nvidia, which is responsible for the generative AI growth and services like OpenAI’s ChatGPT, experienced a 4% increase on Thursday to $117.87. The shares have increased by approximately 138% for the year, following a more than threefold increase in 2023. However, they are still 13% below their all-time high, which was achieved in June.
Nvidia generates an enormous quantity of revenue from a relatively small number of customers, including Microsoft, Meta, Alphabet, Amazon, Oracle, and OpenAI. These organizations are responsible for either the development of large language models, the hosting of large AI workloads, or both. Nvidia’s stock is a subject of concern whenever there is any indication of a decline in demand.
However, reduced rates are perceived as an additional advantage.
On Thursday, Advanced Micro Devices and Broadcom, two other chip manufacturers, also experienced substantial gains, gaining 5.7% and 3.9%, respectively. AMD is endeavoring to contend with Nvidia in the AI market; however, it is significantly behind and has encountered some skepticism on Wall Street. This year, the stock has only increased by approximately 6%.
On Wednesday, Lisa Su, the CEO of AMD, stated to Jim Cramer of CNBC that AI is a lengthy endeavor and that we are currently in the early phases.
“We should refrain from being impatient.” Su stated, “Technological trends are intended to unfold over years, not months.” “We have only been involved in this ChatGPT world for approximately 18 months.” Each of us is acquiring knowledge. It is enjoyable. It is utilized by all of us.
Su stated that AI will be integrated into “all facets of our lives,” such as medication development and education.
Su stated, “The beauty of all this is that you require computing, and that is what we do.”
On Thursday, Tesla experienced the greatest increase among the megacap corporations of the technology sector, with a 7.4% increase. Compared to the Nasdaq’s 20% increase, the electric car manufacturer has been a relative laggard this year, with a decline of nearly 2%. Nevertheless, Tesla has experienced a 72% increase from its year-end low in April.
Apple and Meta, two of the most prominent technology companies, also achieved substantial gains, with each company experiencing a nearly 4% increase.
Source : CNBC News
