Nvidia’s Stunning Results Spark Record Highs in Global Equity Markets
Nvidia, the AI chipmaker, delivered impressive financial results that ignited a surge in equity markets across the globe. The momentum reached a historic peak for Japan’s Nikkei index, a record high not seen since 1989. Bond yields also saw an increase as positive economic data dampened hopes for immediate interest rate cuts.
Major benchmark indices, including the S&P 500 and Dow Jones Industrial Average in the US, Europe’s pan-regional STOXX 600 index, and MSCI’s all-country world index, all hit record highs. This record-breaking trend was fueled by a 16.4% surge in Nvidia’s shares, which in turn lifted AI-related chip stocks globally. China’s stock market extended its winning streak for an impressive eight consecutive sessions.
Nvidia’s forecast for a three-fold jump in first-quarter revenue and its better-than-expected fourth-quarter revenue results contributed to the company adding a staggering $277 billion in stock market value. This marks the largest one-day gain in a company’s market capitalization in history.
The widespread excitement surrounding AI stems from its ability to enhance productivity, which economies have been seeking for over two decades. Thomas Hayes, chairman and managing member of Great Hill Capital LLC, noted that Nvidia represents the catalyst for a productivity enhancement boom in the 2020s. This increased productivity will also help keep inflation in check, according to Hayes.
MSCI’s global stocks gauge rallied 1.67%, reaching both closing and intraday record highs, while Europe’s STOXX 600 index closed up 0.82%, also hitting an all-time high. The STOXX technology index has soared 12.4% year-to-date and is trading at levels not seen in over 23 years. Dutch chipmaking equipment supplier BESI saw a record rise of 4.9% after surpassing fourth-quarter targets due to the demand for AI-related parts.
Wall Street’s Dow Jones Industrial Average closed above the 39,000 mark for the first time, rising by 1.18%. The S&P 500 advanced 2.11%, and the Nasdaq Composite climbed 2.96%. Both the S&P 500 and Nasdaq logged their highest single-day gains since January and February 2023, respectively.
In other economic news, the number of Americans filing new claims for unemployment benefits unexpectedly dropped last week. This indicates solid job growth in February and reduces the pressure on the Federal Reserve to initiate interest rate cuts.
The dollar index saw a slight decrease of 0.038%, with the euro rising by 0.05% to $1.0822. The Nikkei index has surged nearly 17% this year, while the S&P 500 and Nasdaq have rallied about 7% and 8%, respectively, fueled largely by the growing expectations for AI. Nvidia is at the forefront of this AI boom.
Tokyo Electron jumped 6%, Advantest, a chip-testing equipment maker, surged 7.5%, and another chip-related share, Screen Holdings, rallied over 10% as part of Thursday’s record-setting charge. Analyst Nick Nelson from Absolute Strategy noted that the Nikkei’s current record high is driven by strong earnings upgrades, marking a significant difference from the stock market’s bubble in 1989.
Euro-zone yields rose to multi-month highs as markets scaled back their bets on European Central Bank rate cuts for this year. The minutes from the latest Federal Reserve meeting showed policymakers’ concerns about moving too early. The European Central Bank’s rate-setters exhibited patience in their approach, while new PMI data indicated an ease in the downturn of euro zone business activity in February.
The two-year US Treasury yield, which often moves in line with interest rate expectations, rose by 5.9 basis points to reach 4.712%. The yield on 10-year Treasury notes remained relatively flat at 4.321%.
Although most Federal Reserve policymakers expressed concerns about the risks associated with cutting rates too soon, there seems to be widespread uncertainty about the appropriate duration for keeping borrowing costs at their current levels. This reaffirms traders’ belief that a rate cut is not imminent, with market pricing suggesting a one-in-three chance for a first reduction in May.
Oil prices stabilized following a surge in US crude inventories, which partially offset the impact of another attack on shipping near Yemen. US crude settled at $78.61 a barrel, rising by 70 cents, while Brent crude settled at $83.6 a barrel, marking an increase of 64 cents.
Gold prices dipped from their nearly two-week high after jobless claims data signaled a strong US economy. Investors await further economic data to gain more insight into the Federal Reserve’s stance on interest rates. US gold futures settled 0.2% lower at $2030.70 per ounce.
Analyst comment
Positive
As an analyst, the market is expected to continue its upward trend in the near term due to the positive financial results from Nvidia, which has sparked a surge in equity markets globally. The strong performance of AI-related chip stocks and the anticipation of a three-fold jump in Nvidia’s first-quarter revenue have contributed to record highs in major benchmark indices. The positive economic data and reduced expectations for immediate interest rate cuts also add to the market’s optimism.
