Investors saw significant gains in the latter part of the previous week, buoyed by the stellar earnings performance of chipmaker Nvidia. However, lingering concerns about the company persisted even after its earnings report.
Nvidia’s stock surged by 16.8% over Thursday and Friday, briefly pushing its market capitalization past $2 trillion on Friday. It concluded the week as the third most valuable U.S. stock, trailing only Microsoft and Apple. This marked a continuation of Nvidia’s remarkable performance, with shares already up by 59% in 2024, building on a remarkable 239% gain in 2023.
The question on many investors’ minds is whether Nvidia’s impressive momentum can be sustained.
For the broader market, the Standard & Poor’s 500 Index ended the week up by 1.7%, while the Nasdaq-100 Index, where Nvidia holds considerable influence, saw a 1.42% increase. The Nasdaq composite rose by 1.4%, and the Dow Jones industrials added 1.3%.
Nvidia’s remarkable growth has instilled a sense of optimism among investors, particularly those who view Nvidia and artificial intelligence (AI) as pivotal in reshaping the technology landscape. CEO Jensen Huang envisions a future where AI revolutionizes various industries, creating opportunities valued in the “hundreds of billions of dollars” annually.
The magnitude of Nvidia’s impact has prompted analysts to revise their projections for the S&P 500’s performance in 2024. Estimates from Goldman Sachs and UBS range from 5,200 to 5,400, with reports elsewhere suggesting figures as high as 5,500.
Despite this optimism, cautionary voices warn of the market’s tendency to overextend itself and experience sharp pullbacks. The Federal Reserve’s stance on interest rates remains a key factor influencing market sentiment. While there were initial hopes for rate cuts, recent indications from Fed officials suggest a preference for maintaining inflation close to 2%, with discussions even hinting at rate hikes to achieve this goal.
The Federal Funds rate, serving as the benchmark for U.S. interest rates, continues to be closely monitored by investors as they assess the broader economic landscape and its implications for market stability.
