Stocks struggled for direction throughout Wednesday, closing with small losses as investors’ sentiment was shaken by the minutes from the Federal Reserve May meeting. The minutes revealed that the policymakers are concerned about stickier-than-anticipated inflation pressures and feel that there is no reason to cut interest rates before they receive sufficient evidence that price increases are under control.
However, the market mood turned around after hours, as the AI poster child NVIDIA (NVDA) posted its quarterly results. The third most valuable U.S. company topped elevated analysts’ revenue and earnings expectations in the previous quarter, reflecting surging AI-related demand. NVIDIA also produced an upbeat guidance for the current quarter, above analysts’ expectations. Moreover, the chip-design leader lifted its dividend by 150% and announced a ten-for-one stock split, effective on June 7th.
NVIDIA’s report is one of the most important market events, and not only due to the company’s large weight in the S&P 500 (SPX), Nasdaq Composite (NDAQ), and Nasdaq-100 (NDX) indexes. NVIDIA has led and embodied the current tech stock rally, centered around artificial intelligence. As its report and guidance confirm that spending on AI hardware is accelerating, investors have their reassurance that the AI Capex cycle is just at its beginning.
Notably, NVIDIA’s CEO Jensen Huang said that this cycle has expanded beyond hyperscalers such as Microsoft (MSFT), Google (GOOGL), Amazon (AMZN), and other tech behemoths, reaching many other industries while “creating multiple multibillion-dollar vertical markets.” The company sees demand for its products outpacing supply well into the next year. Sustained AI momentum suggests that the revolutionary technology’s advancement can propel stocks further, regardless of whether interest rates are reduced or remain high.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
