Introduction:
The year 2023 has marked a significant milestone for the Nasdaq 100 index, experiencing its most remarkable performance in over a decade. Despite concerns surrounding higher interest rates, investor enthusiasm for artificial intelligence (AI) has propelled the tech sector to new heights. Leading this charge is Nvidia Corp., emerging as the standout performer with a staggering 230% surge, making it the top performer in both the Nasdaq 100 and the S&P 500 Index.
Key Trends and Insights:
- Nvidia’s Astronomical Rise: Nvidia Corp. has become the epitome of excitement in the AI realm, delivering on its promises and reflecting an impressive 230% advance. While debates persist on the stock’s valuation, Wall Street analysts remain bullish, anticipating an unprecedented surge in profits. The company is projected to generate around $48 billion in profit over the next 12 months, a substantial increase from initial expectations of $10 billion at the year’s outset.
- Nasdaq’s Resilience to Higher Rates: Contrary to expectations, the steady climb in interest rates throughout the year did not hinder the Nasdaq 100’s ascent. Despite the 10-year US Treasury yield consistently staying above 4%, the tech sector continued to rise. The resilience was fueled by rising profits, driven by significant cost-cutting measures and spending restraint. Recent momentum in technology stocks has been attributed to signals that the Federal Reserve is concluding its historic policy tightening campaign.
- Dominance of Tech Giants: The seven largest technology and internet-related stocks, namely Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Nvidia, Meta Platforms Inc., and Tesla Inc., collectively held a record 29% weighting in the S&P 500 as of November. Investors gravitated towards these giants, betting on their strategic positions to capitalize on AI due to their extensive scale and financial strength. This cohort played a pivotal role in contributing to approximately two-thirds of the benchmark’s 23% gain in 2023.
- Valuations and Profitability: While increased profits have brought valuations down from previous peaks, they remain elevated. The Nasdaq 100 is currently priced at around 25 times profits projected over the next 12 months, a notable decrease from the peak of 30 in 2020 but still surpassing the two-decade average of 19 times.
Top Tech Stories:
- Intel’s AI-focused Chips: Intel Corp. announced new chips designed for both PCs and data centers, aiming to secure a larger share of the thriving market for AI hardware.
- Google Maps Privacy Change: Alphabet Inc.’s Google altered its Maps tool, cutting off access to users’ individual location histories to enhance privacy and limit response to law enforcement warrants.
- Rocket Lab’s Successful Launch: Rocket Lab USA Inc. successfully launched into space for the first time since its September setback, a crucial test for its competition with SpaceX’s Falcon 9.
- Weibo’s Economic Content Restrictions: Chinese microblogging site Weibo Corp. urged users to refrain from posting negative content about the economy, reflecting concerns about slowing domestic growth.
Earnings Due Friday:
- No major earnings expected.
