Bulls Reload Ai Bets as Nvidia Powers Rally

Stock markets surged as Nvidia Corp.'s optimistic outlook reignited enthusiasm for artificial intelligence, coupled with data indicating the continued stre

ngth of the world's largest economy.

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The most valuable chipmaker experienced a remarkable 15% surge, potentially adding over $230 billion to its market capitalization. This surge is poised to become the largest single-session increase in value ever, surpassing Meta Platforms Inc.'s $197 billion gain earlier this month. Market enthusiasts are now crunching numbers to determine Nvidia's new price-to-earnings ratio, evaluating the cost investors are willing to bear for future growth. Essentially, Nvidia's earnings have outpaced its share price, driving its meteoric rise.

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James Demmert, Chief Investment Officer at Main Street Research, highlighted Nvidia's stellar performance, attributing its success to robust earnings and revenue growth. With a remarkable 265% year-over-year revenue increase, Nvidia has earned a premium valuation, reflecting the company's prowess in the market.

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The Nasdaq 100 surged by 2.5%, while the S&P 500 reclaimed the 5,000 mark. The VanEck Semiconductor ETF (SMH), amounting to $15 billion, witnessed a substantial 6% jump. Tech stocks also led gains in European markets, and Japan's Nikkei 225 continued its record-breaking rally. Equities globally were buoyed by robust manufacturing, housing, and labor market data, with traders seemingly unfazed by more hawkish Federal Reserve commentary.

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Ryan Detrick at Carson Group expressed confidence in Nvidia's consistent outperformance on earnings, emphasizing the company's ability to meet high expectations. He noted the impressive nature of Nvidia's results, stating, "Few things are more certain than death, taxes, and Nvidia beats on earnings."

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Demmert suggested that existing Nvidia investors should hold onto their stocks to capitalize on anticipated future growth, considering the early stages of transformative AI technology. For those not currently holding Nvidia stocks, he recommended buying on any potential weakness. Acknowledging the likelihood of corrections, Demmert maintained optimism that Nvidia's stock would continue to climb despite occasional challenges.

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Nvidia's positive results came as a relief for AI enthusiasts, signaling improved expectations for the industry. Solita Marcelli at UBS Global Wealth Management sees further momentum in AI-related stocks. She maintains a preference for semiconductors and software, identifying opportunities in entities benefiting from AI edge computing, big tech, and their collaborators.

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Nvidia's blockbuster performance underscored the dominance of tech stocks over other market segments. The "Magnificent Seven," a group of mega-cap tech companies, led the overall market gains. Chris Senyek at Wolfe Research anticipates US equities to continue advancing over the next few weeks, with AI-leveraged names, particularly the "Mag 7," and momentum themes propelling the upward trajectory.

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However, not all market industries are experiencing the same level of rallying as the tech sector. Matt Maley at Miller Tabak + Co. emphasized the importance of broader market participation for sustained growth. While acknowledging the significance of the tech sector, he highlighted ample opportunities in various market segments, suggesting a need for a more widespread market surge.

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