What Happened: Shares of leading graphics chip designer Nvidia (NASDAQ rose 6.2% in the afternoon session after markets recovered, with the Nasdaq up 2.1%, while the S&P rose 2.1% 1.1%, following strong gains from big tech companies including Microsoft (NASDAQ:) and Alphabet (NASDAQ:). In particular, the gains highlighted strong demand for ai solutions, including next-generation ai chips. that power most ai applications. These chips are developed by Nvidia and its peers.
For example, during its first-quarter 2024 earnings call, Meta (NASDAQ raised its expected full-year operating expenses and capital expenditures. The cost increase is related to the company's artificial intelligence infrastructure. It also launched its ai assistant, Meta ai. This product has been implemented across its entire application family and is powered by Llama 3, a large open source language model that is a competitor to ChatGPT.
Additionally, during its earnings, Microsoft noted that its operating cash flow was impacted by higher capital expenditures to support cloud and artificial intelligence offerings, and anticipated that “capital expenditures will increase materially on a sequential basis driven by investments in cloud infrastructure and artificial intelligence.” Finally, Alphabet took a similar tone, adding during its earnings: “You can see that in the increases in our capital expenditures. This will drive growth in the cloud and help us push the boundaries of ai models.”
Overall, the future looks bright for Nvidia as it continues to meet growing market demand within the ai space.
Is now the time to buy Nvidia? Find out by reading the original article on StockStory, it's free.
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What the market tells us: Nvidia shares are very volatile and during the last year they have had 10 movements greater than 5%. In this context, today's move indicates that the market considers this news significant, but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago, when the company fell 10% after the major indexes fell: the Nasdaq fell 2.1% while the S&P 500 fell 0.9%. Netflix (NASDAQ: It will stop disclosing subscriber numbers (starting in the first quarter of 2025), and this is contributing to market concerns about the business. The company's share price drop after the results is likely weighing on sentiment towards the stock. technological.
Additionally, it was a challenging week for most risk assets following news of escalating tensions between Israel and Iran, which raised concerns among investors given potential disruptions to business supply chains, especially in the Middle East. .
This adds to ongoing concerns about inflation after the March 2024 CPI (Consumer Price Index, an indicator of the average price consumers pay for goods and services) report revealed that inflation was slightly higher than expected.
On April 16, 2024, Federal Reserve Chairman Jerome Powell echoed a similar sentiment, adding: “Recent data clearly have not given us greater confidence and instead indicate that we are likely to take longer than expected in achieving that trust. This suggests that the Federal Reserve may not reduce its interest rates as quickly as anticipated in 2024, as markets are pricing in fewer rate cuts for the year.
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As a reminder, the determining factor in a stock's value is the sum of its future cash flows discounted to today. With lower interest rates, investors can apply higher valuations to their stocks. It is no wonder that so many members of the investment community are optimistic about 2024. We at StockStory remain cautious as following the crowd can lead to adverse results. In times like these, it is best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
Nvidia is up 82.3% since the beginning of the year and, at $877.42 per share, is trading near its 52-week high of $950.02 from March 2024. Investors who bought Nvidia shares worth $1,000 5 years ago would now be looking at an investment worth $19,723.
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