(Bloomberg) — The stock rally powered ahead as Nvidia Corp.’s bullish outlook rekindled the artificial-intelligence mania and data showed the world’s largest economy is still going strong.
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From the US to Europe and Japan, equities hit all-time highs, with the most-valuable chipmaker up 15% and on course to add more than $230 billion to its market capitalization. That would be the biggest single-session increase in value ever — eclipsing a $197 billion gain made by Meta Platforms Inc. With the numbers now in, bulls are calculating its new price-to-earnings ratio, or how much investors are paying for future growth. Put another way, Nvidia’s earnings have been growing faster than its shares.
“Nvidia got to where it is because of extremely strong earnings and revenue,” said James Demmert, chief investment officer at Main Street Research. “When a company posts 265% year-over-year revenue growth — like Nvidia did — it deserves a premium valuation.”
The Nasdaq 100 added 2.5%, while the S&P 500 climbed the most since November. The $15 billion VanEck Semiconductor ETF (SMH) jumped 6.5%. Equities were also buoyed by solid manufacturing, housing and labor-market data, with traders taking more hawkish Fedspeak in stride. Treasury 10-year yields were little changed at 4.32%.
“Few things are more certain than death, taxes, and Nvidia beats on earnings,” said Ryan Detrick at Carson Group. “The bar was set quite high, and incredibly they’ve once again stepped up and hit a home run.”
Demmert says that for investors who already own Nvidia, the recommendation would be to hold the stock and avoid selling in order to capture future expected growth “as we are still early in this transformative AI technology.”
“For investors who don’t own the stock, we would be buying on any weakness,” he noted. “With Nvidia’s stock, there will be corrections and bumps along the way, but the stock will continue to climb the wall of worry.”
Nvidia’s results come as a relief for AI bulls, as expectations have improved significantly, according to Solita Marcelli at UBS Global Wealth Management. Despite the industry surge, she sees potential for further gains in technology shares — especially those that would benefit from the AI revolution.
“We think the near-term momentum in AI-related stocks is likely to continue,” Marcelli noted. “To position, we maintain our preference for semiconductors and software, and see opportunities in beneficiaries of AI edge computing, big tech, and their partners.”
Nvidia’s blockbuster results also underscored the tech dominance over the rest of the stock market, with the “Magnificent Seven” group of megacaps leading gains.
To Chris Senyek at Wolfe Research, US equities are poised to power ahead over the next two to three weeks — with the AI-leveraged names, most of the “Mag 7,” and momentum themes driving the gains.
Indeed, other stock-market industries are not rallying as strongly as the tech sector.
“We still believe it is going to be important for the stock market to broaden out a lot more than it has this year if it’s going move a lot more than it already has so far this year,” said Matt Maley at Miller Tabak + Co. “What we’re trying to say is that although the tech sector is the most important one for the stock market right now, there are still plenty of opportunities in other sectors in the marketplace.”
Corporate Highlights:
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AT&T Inc. is responding to widespread disruptions to its mobile service across the US that had tens of thousands of customers complaining that they couldn’t make or receive calls.
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Rivian Automotive Inc., an electric-vehicle maker, issued a disappointing production forecast and announced another round of job cuts.
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AbbVie Inc. is barreling into the red-hot US investment-grade bond market on Thursday to help fund its acquisitions of ImmunoGen Inc. and Cerevel Therapeutics Holdings Inc., adding to a recent rush of buyout financings.
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Moderna Inc. reported fourth-quarter revenue that beat analysts’ expectations by gaining Covid vaccine market share on its rival, Pfizer Inc.
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Newmont Corp., the world’s top gold producer, will sell six mines and two projects in a set of divestitures aimed at generating $2 billion in cash.
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Space exploration startup Intuitive Machines Inc. will attempt on Thursday to put the first intact, US-made lander on the moon in more than 50 years.
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Brazil’s JBS SA says its planned listing in the US will likely be delayed into the second half of 2024 as the world’s largest meat producer works to allow more investors to vote on the move.
Key Events This Week:
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China property prices, Friday
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Germany IFO business climate, GDP, Friday
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ECB publishes 1- and 3-Year inflation expectations survey, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 rose 1.7% as of 11:44 a.m. New York time
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The Nasdaq 100 rose 2.5%
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The Dow Jones Industrial Average rose 0.7%
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The Stoxx Europe 600 rose 0.8%
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The MSCI World index rose 1.4%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0814
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The British pound was little changed at $1.2646
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The Japanese yen fell 0.2% to 150.57 per dollar
Cryptocurrencies
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Bitcoin rose 0.2% to $51,509.42
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Ether rose 1.5% to $2,972.5
Bonds
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The yield on 10-year Treasuries was little changed at 4.32%
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Germany’s 10-year yield declined one basis point to 2.44%
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Britain’s 10-year yield was little changed at 4.10%
Commodities
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West Texas Intermediate crude rose 0.8% to $78.53 a barrel
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Spot gold fell 0.2% to $2,021.37 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Subrat Patnaik, Carmen Reinicke and Ryan Vlastelica.
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