(Bloomberg) — Nvidia Corp.’s blowout sales forecast took center stage in markets, fanning gains in tech stocks around the world and propelling Nasdaq 100 futures to a 2% gain.
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Nvidia soared as much as 14% in pre-market trading after results showed demand is exploding for artificial intelligence computing hardware. The company, which is on the verge of surpassing Alphabet Inc. in market value, has been the biggest driver of US stock market gains this year.
The promise of big tech investment added to a bullish mood in markets. Japan’s Nikkei 225 Index hit a record high for the first time since 1989 and the Stoxx Europe 600 index surpassed its January 2022 closing peak.
The global market for generative AI may reach $1.3 trillion in 2032, according to estimates from Bloomberg Intelligence analyst Mandeep Singh. Explosive growth in the sector should boost hardware, software and internet companies again this year, he wrote in a recent report.
“AI is a transformative technological change that will allow companies and economies to do more with less,” said James Demmert, the chief investment officer at Main Street Research. “This leads to higher profit margins and greater productivity. It’s a very exciting sea change that will likely create a super cycle of growth, profits and stock prices in the coming years. Nvidia is at the center of this.”
Other US chipmakers rose on Nvidia’s coattails. Advanced Micro Devices Inc. climbed 5% in the premarket, Applied Materials Inc. added 4% and Intel Corp. was up more than 2%.
While some investors have been concerned about a possible bubble forming around AI-related stocks, others noted that Nvidia is still less expensive than peers. The stock traded at about 30 times forward earnings as of Wednesday’s close, compared with AMD at 43 times. The shares are also cheaper than those of Amazon.com Inc. and Microsoft Corp., while the Nasdaq 100 Index trades at a 25 times multiple.
The latest numbers mean Wall Street estimates for Nvidia are set to be revised higher, which will likely bring down the valuation once again if the share price doesn’t keep pace.
The hype around Nvidia’s earnings overshadowed a hawkish tone to the minutes of the Federal Reserve’s last policy meeting, where most officials expressed concern about the risk of cutting interest rates too soon. Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkari are set to speak today, providing investors with more food for thought along with jobs and home-sales data.
Treasuries were steady after a selloff that pushed the 10-year yield five basis points higher on Wednesday. A gauge of the dollar declined for a fourth day.
The Nikkei 225’s stellar rally comes as global funds pile back into a market that was overlooked for years in favor of faster-growing markets like China. The move caps a 34-year roller-coaster ride that saw shares go from the most richly valued in the world to among the most depressed — before finding an equilibrium now in between these extremes.
“As Japan becomes a normal country with inflation, its companies will have all kinds of potential,” said Masayuki Murata, general manager of balanced portfolio investment at Sumitomo Life Insurance. “They appear to be stepping into a world where revenue rises even as costs climb, instead of a place where you have to continually cut spending as sales shrink.”
Over in Europe, tech shares led the advance in the Stoxx Europe 600, climbing more than 3%. The region’s biggest chipmaker, ASML Holding NV, advanced as much as 5%. Stocks pared gains after data showed euro-area private-sector activity hit an eight-month high despite an increasingly dire situation in German manufacturing. Traders trimmed bets on rate cuts by the European Central Bank.
Meanwhile, Europe’s earnings season remains in full swing:
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Mercedes-Benz Group AG jumped after the German carmaker’s gloomy earnings forecast was offset by its plan for an accelerated $3.2 billion buyback.
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Rolls Royce Holdings Plc surged after reporting higher-than-expected profit.
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BE Semiconductor Industries NV shares jumped after fourth-quarter revenue rose 16%, snapping six quarters of falling sales, as demand from artificial intelligence customers eclipsed persisting weakness in other pockets of the industry
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Nestle SA slumped after forecasting a slowdown in revenue growth.
Elsewhere, West Texas Intermediate crude held around $78 per barrel, supported by tightening physical supplies. Gold climbed above $2,029 per ounce. Bitcoin steadied after a drop Wednesday.
Key Events This Week:
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US initial jobless claims, US existing home sales, Thursday
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ECB issues account of January meeting, Thursday
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Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkari speak, Thursday
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China property prices, Friday
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Germany IFO business climate, GDP, Friday
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ECB publishes 1- and 3-Year inflation expectations survey, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 1.3% as of 7:34 a.m. New York time
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Nasdaq 100 futures rose 2.1%
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Futures on the Dow Jones Industrial Average rose 0.4%
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The Stoxx Europe 600 rose 0.8%
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The MSCI World index rose 0.4%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro rose 0.3% to $1.0849
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The British pound rose 0.3% to $1.2674
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The Japanese yen was little changed at 150.32 per dollar
Cryptocurrencies
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Bitcoin rose 0.3% to $51,559.98
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Ether rose 1.9% to $2,983.85
Bonds
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The yield on 10-year Treasuries was little changed at 4.32%
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Germany’s 10-year yield was little changed at 2.45%
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Britain’s 10-year yield was little changed at 4.11%
Commodities
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West Texas Intermediate crude fell 0.2% to $77.76 a barrel
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Spot gold rose 0.2% to $2,029.75 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Carmen Reinicke, Ryan Vlastelica and Hideyuki Sano.
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