Nvidia Leads NASDAQ to Record Highs, Can U.S. Stocks Continue to Rise?

In the first quarter of 2024, global major stock markets continued the strong performance that began in 2023, with major indices steadily rising and reaching new historical highs. The U.S. stock market made a significant contribution, with the NASDAQ index closing at 16,428 points at the end of March, setting a new historical high. If taking January 1, 2022, as the baseline, by the end of March 2024, the NASDAQ had fully recovered the losses since 2022.

So, why can the NASDAQ continuously reach new highs? What are the hidden factors behind the rising NASDAQ that are driving the U.S. stock market?

Since the beginning of 2024, the U.S. stock market’s NASDAQ index has frequently hit new highs. This round of rise in the U.S. stock market owes much to the speculation in artificial intelligence concept stocks. Among them, Nvidia (NVDA) was the best-performing stock in the first quarter. Driven by Nvidia’s extraordinary performance, global investors have sparked a new round of enthusiasm for technology stocks, causing chip and technology stocks in the U.S. stock market to surge. As the heavyweight stock of the NASDAQ index, these technology giants have led the rise of the U.S. stock indexes.

AI Explosion, Nvidia “Soaring”

Different from the high growth last year, the “Big Seven” in the U.S. stock market have shown noticeable differentiation this year. If classified by stock price gains and losses, they can almost be divided into three tiers: the first tier undoubtedly belongs to Nvidia, which “soared” in gains. As the “shoveler” in the AI era, its stock price skyrocketed from over 100 dollars at the beginning of the year to now over 800 dollars, with the market value increasing by more than one trillion dollars; the second tier is made up of three other giants that have risen within the year—Meta, Amazon, and Microsoft; while the third tier consists of giants that have fallen so far this year—Google, Apple, and Tesla. These three giants have encountered their respective bottlenecks and new negative factors after last year’s stock price surge, especially Tesla, which has seen the largest decline.

As the biggest beneficiary of the rise of artificial intelligence, Nvidia can be described as the most dazzling listed company in the past year, with its stock price surging 239% last year, and the crazy upward trend continues, constantly refreshing the historical highs of its stock price. In some sense, the reason why there is such a difference in the performance of the “Big Seven” this year is undoubtedly still AI. Under the AI wave, Nvidia has become the most prominent technology stock at present.

Currently, Nvidia’s total market value has reached 2.23 trillion dollars. How to describe this price? It can be said that the market value of one Kweichow Moutai plus three Contemporary Amperex Technology Co. Limited is enough to match the worth of Nvidia.

Nvidia’s latest financial report shows that its revenue reached 60.9 billion dollars in the 2023 fiscal year, an increase of 126%, creating a historical high; its net profit was 29.7 billion dollars, an increase of 581%. Almost on the same day, the trading department of Goldman Sachs Group called it “the most important stock on the planet,” due to Nvidia’s significant influence on the index, which could shake the entire market.

While many people are deeply intoxicated by the rise in Nvidia’s stock price, there are also many voices emphasizing the risk of a pullback. Goldman Sachs’ tactical expert wrote in a report to clients about his judgment on Nvidia: “Everyone is betting, and position warning signals have appeared. The threshold is high, by ‘high’ I mean that a big hit is expected.”

Under Nvidia’s record-breaking performance, other companies have also contributed significantly. For example, Microsoft, AMD, ASML, Amazon, Google, and others, all have experienced different degrees of rise. Not only has the U.S. stock market been driven, but also the European market and the Japanese stock market have seen a wave of new highs led by technology companies. It is evident that this frenzy is actually based on Nvidia’s impressive performance, and behind it is a global capital linkage of artificial intelligence chip manufacturers representing the future of technology development. Naturally, we say that the NASDAQ, especially gathering technology stocks and leading global cutting-edge quality companies, is undoubtedly one of the biggest beneficiaries of this grand carnival.

So the question arises, will the NASDAQ continue to prosper?

Now, in front of the U.S. stock market, the important uncertainty is actually the attitude of the Federal Reserve.

Previously, both the U.S. and global stock markets were watching the Federal Reserve’s face, especially in terms of interest rate expectations management. People worried that the continuous rate hike state would have a negative impact on the global stock market. Moreover, many investors also think this way, worrying about sudden market changes.

However, the reality seems not to have played out this way. Since 2024, the rise in the U.S. stock market has not been affected by the change in interest rate cut expectations. The three major stock indexes frequently refreshed historical records, and the AI craze has not shown signs of slowing down. Nvidia, AMD, and others continue to be leaders in the rising U.S. stock market. The market seems to have adapted to the Federal Reserve’s “procrastinating” style of interest rate expectation management, gradually weakening the psychological impact of interest rate cut expectations on the stock market. If this is the case, the next step might stimulate the stock market, especially the U.S. stock market with a rising risk preference.

Generally speaking, interest rate cuts mean releasing liquidity to the market, which is also good for the stock market. Naturally, as time goes on, the policy of interest rate cuts will also approach, and the continuous bull market and rise in U.S. stocks will become a sustained possibility. Moreover, technology stocks, with a higher risk preference, are likely to attract more investment in the future because they are not afraid of the interest rate hike environment and have a promising future.

Therefore, we are not only more likely to see the steady growth of U.S. stocks but also witness the rise in technology stocks at the forefront of the U.S. stock fortress. Naturally, the possibility of the NASDAQ creating new records will also greatly increase. So, as investors, the editor suggests that you can monitor market trends regularly on the BiyaPay App according to your investment strategy and get on board at the right time. If you want to buy at a low price, just search its code on BiyaPay to trade in real-time online. You can also deposit digital currency (U) into BiyaPay and then withdraw fiat currency to invest in U.S. stocks.

However, cautious views are not in the minority.

For example, Michael Wilson, the star strategist at Morgan Stanley, believes that the stock market rise over the past five months has been driven by looser financial conditions and higher valuations, rather than an improvement in fundamentals. “The further expansion of the U.S. stock market’s P/E ratio may depend on rising profit expectations. Considering that the earnings forecasts for 2024 and 2025 have hardly changed during this period, it is difficult to justify the high valuation of the index level based solely on fundamentals,” he said.

J.P. Morgan analyst Mislav Matejka is also concerned about the disconnect between earnings expectations and stock prices, “We worry that, for various reasons, profit growth may slow down. If earnings acceleration fails to materialize, this could be a constraining factor.”

Charles Schwab wrote in its market outlook that the bull market momentum might push U.S. stocks higher in the future, “Last week’s economic data was largely supportive, as the PCE data matched economists’ estimates, and the final reading of last quarter’s GDP confirmed the economy’s resilience. The current bull market has taken control of the situation.”

The institution believes that there are nearly two weeks left until the new earnings season, and before that, several potential catalysts need attention. These include the non-farm employment report and March CPI. “Employment and inflation data have always supported the bull market argument. If the Federal Reserve believes their policy interest rate is currently restrictive, we should be prepared for some economic weakness to appear in the data. For the market, the risk of delaying rate cuts due to data exceeding expectations is still worth watching.”

In summary, with the Federal Reserve at the end of the rate hike cycle and interest rates at a high point, entering the interest rate cut expectation cycle may have a positive impact on U.S. stocks. Although U.S. stock valuations are not cheap currently, they are still reasonably positioned. The 2024 U.S. stock market trading will revolve around the election, interest rate cut expectations, and corporate earnings guidance. Before the interest rate cut cycle begins, a fluctuating trend may be a better opportunity to increase positions.