The Nasdaq 100 stock index recovered from potential trouble in just three weeks, thanks to a powerful $2 trillion rally by Big Tech companies. Investors decided to stick with what has worked all year: pour more money into the biggest tech stocks.
This rally has given the Nasdaq a sudden 180-degree turn, going from a possible slowdown to hitting a 15-month high. Along the way, it added about $2 trillion to its total value.
Although some big tech companies, such as Apple and Meta Platforms Inc., gave less optimistic forecasts for the future, investors did not let that deter them. They continued buying, driving the market higher.
Experts are hopeful that giants like Microsoft and Apple will lead the market in the last six weeks of the year. Despite concerns that technology companies are already valued too highly, investors appear to believe there is more room for growth.
Jason Benowitz, who manages investments at CI Roosevelt, said: “Some tech giants are doing much better than the rest of the market. We have to see if the others catch up and how that might happen. But I’m not worried about that happening anytime soon.”
Investors are optimistic because signs suggest the Federal Reserve may stop raising interest rates. Additionally, demand for artificial intelligence services is helping companies like Nvidia Corp. do well.
For example, Microsoft’s cloud computing business received a boost from customers using products from OpenAI, owner of ChatGPT. This helped Microsoft stock hit a record high, nearly reaching a value of $3 trillion.
While the Nasdaq 100 is priced at 24 times what experts expect it to earn, down from a high of 27 times in July, it is still considered quite high. Companies like Microsoft, Amazon and Apple have even higher price-earnings ratios.
Although there are questions about how long this rally will last, investors are now looking at Nvidia, a company that will soon report earnings. Wall Street is hoping for another strong report, but there’s a risk it won’t meet those high expectations.
Investors want to see how new restrictions on chip exports from the United States could affect Nvidia. This comes at a time when the United States and China are in a technological battle, affecting companies like Alibaba.
Despite the challenges, Big Tech’s earnings look good enough to ease concerns about high valuations, according to Anastasia Amoroso, chief investment strategist at iCapital. She thinks Nvidia, with its more than 200% increase this year, may seem expensive, but when you look at the big picture, it’s not too extreme.
Other tech news:
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Applied Materials Inc., the largest maker of chip-making machinery in the United States, is being investigated for violating export rules to China.
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Apple is having difficulty making a new chip for the iPhone, in part because it is difficult to replace a Qualcomm Inc. part.
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Alibaba changed plans to spin off its $11 billion cloud business amid the tech battle between the United States and China.
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Alphabet Inc. CEO Sundar Pichai believes China will be a leader in artificial intelligence and says it is crucial for the United States and China to work together.
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IBM stopped advertising on X (formerly Twitter) after its ads were found near publications supporting Nazi ideas.
Also read: Stock Market Update: Earnings Target Increases Beat, Fueling Another Stock Rally