Nvidia surges on AI boom, setting off a rally on Wall Street

A person stands in front of an electronic stock board in Japan.

By ZIMO ZHONG

Associated Press

Feb. 22, 2024 8:15 PM PT

HONG KONG — Nvidia’s stock price surged Thursday after the company delivered another blowout quarter, setting off a rally in other technology companies that carried Wall Street to another record high.

The chipmaker, a central player in the boom surrounding artificial intelligence, reported scorching demand for its semiconductors.

The Standard & Poor’s 500 index rose 105.23 points, or 2.1%, to 5,087.03, an all-time high. The Nasdaq rose 460.75 points, or 3%, to 16,041.62.

The Dow Jones industrial average, which has a smaller weighting in tech stocks, jumped 456.87 points, or 1.2%, to 39,069.11. That marks its first close above 39,000.

Nvidia soared 16.4%, leading the gains for tech companies and the market. Its stock has tripled over the last year, thanks to a surge in investor enthusiasm for AI. Synopsis, which makes software used to test and develop chips, rose 6.9% after boosting its profit forecast.

Other chipmakers and companies involved in the chipmaking industry also gained ground. Advanced Micro Devices rose 10.7% and Lam Research added 4.7%.

Technology stocks have been the driving force behind the market’s rally that started in October. Solid earnings from some of the biggest names in the sector are helping to justify and reinforce those gains.

“Investors are still wondering, will the market top out or broaden out?” said Sam Stovall, chief investment strategist at CFRA. “As of now, investors are basically saying I’m going to let this market take me where it wants to go, and right now that’s higher.”

Overnight, Japan’s Nikkei 225 surged to an all-time high. Record gains in corporate earnings have enhanced the appeal of shares in Japanese companies, along with the weakness of the Japanese yen against the U.S. dollar.

On the losing end, electric truck and sport utility vehicle maker Rivian tumbled 25.6% after it reported another loss and issued a weaker-than-expected production outlook. Lucid, another electric vehicle maker, slid 16.8% after it missed Wall Street sales forecast and also gave a weaker production estimate than analysts had expected.

Online craft marketplace Etsy fell 8.4% after it missed Wall Street’s profit forecast by a wide margin.

AT&T fell 2.4% after an outage knocked out cellphone service on its network across the U.S. for hours.

Wall Street expects slightly less than 4% growth for earnings in the overall S&P 500 during the fourth quarter. The communication services sector, which includes Google’s parent, Alphabet, is expected to report 45% growth. Information technology companies, which include Nvidia, are expected to notch 22% growth.

“The near-term momentum in AI-related stocks is likely to continue,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.

Nearly 90% of companies in the S&P 500 have reported earnings. There are still a few big names left to report over the next several weeks, including Lowe’s, Dollar Tree and Best Buy.

Wall Street’s focus on earnings this week follows economic data from the previous week that prompted a stumble in the market. Inflation data came in hotter than Wall Street expected, while retail sales fell more than anticipated. That raised concerns about the timing of hoped-for interest rate cuts from the Federal Reserve.

Wall Street is now betting that the central bank will start trimming its benchmark rate in June, rather than March.

Investors could get more clarity on inflation next week when the government releases its monthly report on personal consumption expenditures, the Fed’s preferred measure. The Fed is trying to get inflation down to its target of 2%. Analysts expect that report to show inflation cooled to 2.3% in January. It peaked at 7.1% in June of 2022.

Bond yields held relatively steady. The yield on the 10-year Treasury rose to 4.34% from 4.32% late Wednesday.