Tech Stocks Surge as AI and Chipmakers Drive Market
Frenetic trading activity surrounding artificial intelligence (AI) and chipmakers has propelled tech-heavy stock indexes, including Wall Street’s Nasdaq, to near all-time highs. Despite a temporary setback caused by Tuesday’s US inflation update, market experts believe the rally will continue.
The US annual consumer price inflation is expected to drop to a nearly three-year low of 2.9%, marking the first time it has fallen below 3% since March 2021. This has provided assurance to rates and bonds markets, which have remained stable. While Federal Reserve futures markets are now eyeing a May interest rate cut rather than March, the central bank welcomes the retreat in consumer price index (CPI) rates, even if core rates remain stubbornly high.
Adding to the positive sentiment is the New York Fed’s household survey, which shows a decline in three-year inflation expectations to just 2.4% – the lowest in nearly four years. Alongside this, Japan’s Nikkei has surged almost 3% and reached a fresh 34-year high, buoyed by a strong tech sector boost and a softening yen against the dollar. The index is now only 2% away from breaking its record peak set during Japan’s property bubble in 1990.
SoftBank, which holds a 90% stake in chip developer Arm Holdings, experienced a 6.27% climb thanks to the extraordinary share price boom in the AI sector. Arm’s shares surged by another 40% on Monday, giving the company a record market value of $141 billion – nearly triple its initial public offering last September. At the same time, chip giant Nvidia briefly surpassed Amazon.com in market capitalization, making it the fourth-most valuable US company.
Ahead of the inflation release, Nasdaq futures dipped by about 0.5%, with overall futures showing a decrease of approximately 0.4%. However, small caps outperformed on Monday, with a 1.8% climb, while large caps stumbled at new highs. Bitcoin also saw positive movement, reaching its highest level since December 2021 at $50,393 and maintaining a steady position above $50,000 for the second consecutive day.
Meanwhile, in Europe, the news of weak UK pay growth at the end of 2023 caused a rise in sterling but led to falls in British stocks and bonds. Despite this setback, market analysts and investors remain optimistic about the overall performance of the tech sector and its continued impact on global markets.
Analyst comment
Positive news. As an analyst, the market is expected to continue its rally, especially in the tech sector, driven by AI and chipmakers. The US inflation drop and stable rates and bonds markets provide assurance. The surge in tech stocks is reflected in the strong performance of the Nasdaq and other indexes. The tech sector boost has also led to soaring market values for companies like Arm Holdings and Nvidia. Overall, the sentiment is positive, and the market is expected to remain strong.
