Nasdaq Index, Dow Jones, S&P 500 News: Nvidia Jump Driving Early Semiconductor Sector Gains

James Hyerczyk
Updated: May 26, 2024, 13:08 GMT+00:00

Key Points:

  • Nasdaq futures rise after Nvidia's impressive quarterly earnings, despite Fed's hawkish minutes.
  • Nvidia's data center business sees significant growth, driving market optimism.
  • Fed minutes reveal inflation concerns, impacting rate cut expectations for late 2024.
Nvidia Chip

In this article:

Nasdaq-100 Futures Rise on Nvidia’s Robust Performance

Nasdaq-100 futures climbed on Thursday following Nvidia’s impressive quarterly earnings report, overshadowing hawkish sentiments from recent Federal Reserve minutes. Nvidia’s data center business, which surged 427% in the last quarter, played a crucial role in driving its historic rally.

At 12:10 GMT, Dow Futures are trading 39846.00, up 63.00 or +0.16%. S&P 500 Index futures are at 5363.50, up 35.50 or +0.67% and Nasdaq futures are trading 18989.50, up 202.75 or +1.08%.

Nvidia’s Data Center Growth

Nvidia’s success is largely attributed to its data center business, which reported significant growth as companies continue to invest in AI processors. The company’s clients, including major cloud providers like Amazon Web Services, Microsoft Azure, Google Cloud, and Oracle Cloud, represented nearly 45% of Nvidia’s $22.56 billion in data center sales. Additionally, startups focused on GPU data centers are increasingly utilizing Nvidia’s hardware to offer rentable server time, essential for training large AI models.

AI Investment Returns

Nvidia reassured investors about the profitability of AI investments. CFO Colette Kress highlighted that cloud providers see a strong return on investment, with every $1 spent on Nvidia hardware potentially generating $5 in rental revenue over four years. The newer HDX H200 product could even generate $7 for every $1 invested, indicating sustained demand and profitability in the AI sector.

Broader Semiconductor Sector Gains

Nvidia’s positive earnings and future guidance lifted the broader semiconductor sector. Companies like Super Micro Computer, Micron Technology, and AMD saw premarket gains, and the VanEck Semiconductor ETF (SMH) rose by 3%. Nvidia’s fiscal second-quarter revenue guidance of $28 billion exceeded expectations, reinforcing confidence in the company’s growth trajectory.

Fed Minutes Indicate Inflation Concerns

Despite Nvidia’s upbeat news, the broader market faced pressure from the latest Federal Reserve minutes. Officials expressed concerns over persistent inflation and the timing of interest rate reductions. While some progress on inflation has been noted, the Fed remains cautious about easing policy too soon. The market’s expectations for rate cuts have adjusted accordingly, with only a modest chance of reductions in late 2024.

Market Forecast

Given Nvidia’s robust earnings and optimistic guidance, the tech sector, particularly semiconductors, is likely to maintain a bullish outlook. However, the broader market might experience volatility due to ongoing inflation concerns and the Federal Reserve’s cautious stance on rate cuts. Traders should closely monitor Fed updates and economic data releases to gauge market sentiment accurately.

Technical Analysis

Daily E-mini Nasdaq-100 Index

E-mini Nasdaq-100 Index futures are sharply higher during the pre-market session, leading to the call for a surge on the cash market opening.

The tech-heavy index is trading at a record high so there is no resistance. Minor support is 18545.00. If this fails to hold, momentum could shift to the downside over the short-run.

Investors needn’t worry about the downside unless the 50-day moving average at 18186.17 is violated.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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