The S&P 500, a wide-ranging index encompassing large-cap firms, concluded the day virtually unchanged, while the tech-centric Nasdaq 100 saw an uptick of 0.55%. This ascent was predominantly propelled by Nvidia, which surged 3%, achieving a market capitalization exceeding $5 trillion.
Notably, this valuation surpasses the GDP of each G7 nation, apart from the United States and Japan. However, Nvidia’s stock dipped by 0.7% in premarket trading, indicating that some investors may be capitalizing on their overnight gains.
Jerome Powell’s commentary on artificial intelligence was notably comprehensive, as he faced a deluge of inquiries during a question-and-answer session with journalists. He consistently emphasized that the Federal Reserve remains unfazed by the soaring valuations of AI enterprises and the considerable capital investments they have engendered.
“The expenditure necessary to develop data centers nationwide is not particularly sensitive to interest rates. It is based on long-term evaluations that predict substantial investment in this sector, which, in turn, is anticipated to enhance productivity and similar outcomes,” he articulated.
“The firms commanding such exorbitant valuations are, in fact, generating earnings and exhibit sound operational frameworks. In contrast to the 1990s dot-com era, when the emphasis was primarily on speculative ideas rather than substantial enterprises, today’s tech companies are underpinned by demonstrable business models and profitability, marking a significant distinction,” he added.
Essentially, Powell appears to grant the technology sector a tacit endorsement to pursue investments in AI, asserting that he perceives no imperative to raise interest rates to mitigate any signs of reckless optimism.
In the wake of earnings disclosures from major players Meta, Microsoft, and Alphabet, investors responded with caution. Notably, shares of Meta plummeted 8.6% in premarket trading after remaining static the previous day, largely due to investor discontent regarding the company’s financial outlays on AI initiatives.
Similarly, Microsoft observed a premarket decline of 2.64%, following a lackluster session the day prior.
Conversely, Alphabet (Google) saw its shares increase by 7% premarket, despite the company’s ongoing substantial investments in AI.
The contrasting performances of Microsoft, Meta, and Alphabet illustrate the mixed expectations surrounding the burgeoning AI investment landscape. Collectively, these three technology titans reported a staggering 89% year-over-year surge in capital expenditures, reaching $78 billion for the recent quarter.
However, with Meta meeting its revenue forecast for the current quarter ($56-59 billion as opposed to the anticipated $57.4 billion) and Microsoft indicating that its cloud division’s growth remained hampered by capacity constraints (+39% year-over-year compared to an estimated +37%), lingering uncertainties persist regarding these lofty expectations, noted Jim Reid and colleagues at Deutsche Bank in a missive to clients this morning.
“We have yet to witness a corporation of this magnitude in the annals of financial history. With Microsoft (-0.10%) breaching the $4 trillion mark earlier this week and Apple (+0.26%) achieving this milestone yesterday, these entities are now more comparable to sovereign nations than mere corporations,” Reid remarked.
Here is an overview of market conditions preceding the opening of trading in New York:
- S&P 500 futures were down 0.2% this morning, having closed flat at 6,890.
- STOXX Europe 600 reported a decrease of 0.44% in early trading.
- The U.K.’s FTSE 100 fell by 0.4% early in the trading session.
- Japan’s Nikkei 225 remained unchanged.
- China’s CSI 300 witnessed a decline of 0.8%.
- The South Korea KOSPI experienced a slight increase of 0.14%.
- India’s NIFTY 50 declined by 0.68%.
- Bitcoin dipped to $110K.
Source link: Fortune.com.
