Markets rallied strongly on Wednesday, pushed up by Nvidia (NVDA) and Jerome Powell. The S&P 500 (SPX) clocked in its 19th all-time high this year, registering its second consecutive record-breaking day. All major indexes strongly advanced, with the rally also engulfing market niches that were lagging in the past year, such as the small-cap benchmark Russell 2000.
The gains were broad-based, with over 80% of stocks advancing, the best daily breadth so far this year. Nine out of eleven S&P 500 sectors were in the black for the day, while year-to-date only Real Estate remains in the red. Although technology stocks continue to lead the market, improved breadth validates the rally.
Nvidia’s Mega Show Lifts the Markets
Tuesday’s rally was reignited by news from Nvidia’s GTC Conference, the most important annual IT event globally. The chipmaking leader made a major announcement, revealing a new line of computing platforms called “Blackwell,” delivering an immense upgrade to the world’s AI infrastructure. Blackwell cuts the AI model training time by four times compared to Nvidia’s existing flagship chip H100, while delivering 30 times the inference performance per GPU. The company said that all hyperscalers and AI cloud operators will use Blackwell, including Amazon’s (AMZN) AWS, Alphabet’s (GOOGL) Google Cloud, Microsoft’s (MSFT) Azure, Oracle’s (ORCL) Cloud Infrastructure, including IBM’s (IBM) Cloud.
In addition, the company’s CEO Jensen Huang revealed several other developments concerning vertical integration of systems running the highest-performance AI models, networking switches and other networking products, and signaled its intent to extend AI infrastructure into new markets, such as telecommunications, healthcare, and robotics. Basically, Nvidia plans to grow its economic moat from a world-leading chip company to an integrated provider of the most advanced computing systems to all industries. As a result of these announcements, investors were reassured that Nvidia will continue to maintain its dominance, despite the rising competition. Prompted by this news, NVDA’s stock soared, propelling the markets higher.
Macro News in Focus
On Wednesday, the rally received additional air in its sails after Federal Reserve Chair Jerome Powell signaled that the central bank is still on track to cut interest rates later this year, despite some uptick in inflation readings.
Policymakers confirmed their outlook for three rate cuts by the end of 2024, reiterating that they would need to be more confident that inflation is moving toward their target before beginning to ease monetary policy. The Fed’s “Dot Plot”, which summarizes the Board members’ rate projections, was unchanged from last December.
In addition, Powell said that the central bank will soon slow the pace of quantitative tightening (reducing the amount of bond holdings on its balance sheet), a move which confirms that the Fed is not too worried about higher-than-expected price increases at the start of the year.
Notable Stock News
¤ Paramount Global (PARA) soared following reports that private equity firm Apollo Global Management offered $11 billion to buy out its film and television studios.
¤ Micron Technology (MU) rallied after delivering robust earnings results and providing a stronger-than-expected revenue guidance, buoyed by demand for its AI-supporting hardware.
¤ Super Micro Computer (SMCI) plunged after the company said it will issue an additional 2 million shares. SMCI will use the funds for working capital purposes, manufacturing capacity expansion and increased R&D investments. Despite the decline, analysts are lifting the company’s price targets, as they see it as best positioned to capitalize on Nvidia’s AI systems advancement, as it has a wide range of GPU-optimized liquid-cooled systems ready to deploy.
