Big tech looked poised for a rebound after Nvidia Corp.’s solid results and outlook bolstered confidence in the artificial-intelligence frenzy that has powered the stock market resurgence. 

The giant chipmaker soared in late trading after predicting another blowout sales gain for the current quarter, with Chief Executive Officer Jensen Huang saying “accelerated computing and generative AI have hit the tipping point.” A US$243 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) pushed decidedly higher after struggling to find direction in the immediate aftermath of Nvidia’s earnings.

Given its massive influence on broader indexes, Goldman Sachs Group Inc.’s trading desk earlier called the chipmaker “the most important stock on planet earth.” A member of the “Magnificent Seven” group of megacaps, the Santa Clara, California-based behemoth has been responsible for one-third of the Nasdaq 100’s gain this year.

“As goes Nvidia, so goes the market,” said Kim Forrest, chief investment officer of Bokeh Capital Partners LLC. “And it looks like the results are good enough. It does confirm the narrative that AI is going to continue to be strong for the foreseeable future. This narrative supported the markets last year, why wouldn’t it do the same this year?”

“Few things are more certain than death, taxes, and Nvidia beats on earnings,” said Ryan Detrick at Carson Group. “The bar was set quite high, and incredibly they’ve once again stepped up and hit a home run.”

Just a few minutes before the close of regular New York trading on Wednesday, the S&P 500 staged a rebound with traders wondering whether Nvidia’s results would be able to spur a rebound in tech megacaps after a recent rout. 

“Nvidia has been the ‘poster child’ of AI enthusiasm because NVDA makes the type of semiconductor chips that power generative AI and demand for those chips has gone through the roof,” said Tom Essaye, founder of The Sevens Report. “The AI-driven rally in the ‘Mag Seven’ is largely justified by the fact that they’re making a lot more money than they were previously.”

Stakes were so high for Nvidia’s earnings that even strategists who wouldn’t normally comment on individual securities had something to say ahead of the numbers.

“We do not usually talk about individual stocks as asset allocation traditionally is the largest driver of portfolio risk and return,” said Emily Roland and Matt Miskin at John Hancock Investment Management. “While Nvidia is high quality for sure, to us the AI hype has gone beyond the ‘reasonable price’ stage.”

A host of similarities between tech stocks now and previous bubbles suggest the “Magnificent Seven” is only nearing — but not yet at — levels that may lead it to pop, Bank of America Corp. strategist Michael Hartnett said last week.

While Nvidia is the proverbial “picks and shovels” of the “AI gold rush”, other big-tech companies such as Microsoft Corp., Meta Platforms Inc., Alphabet Inc., Amazon.com Inc. and Apple Inc. have also seen large stock rallies as investors expect these companies to harness the power of generative AI to boost profits, Essaye noted.

“Has the AI mania gone too far and are we looking at a bubble situation?” Essaye said. “Based on what most of us think about typical bubbles, the answer is ‘no’ they are not in a bubble.”

Traders also kept a close eye on the latest Federal Reserve minutes that showed officials are in no rush to cut rates.

“Given the uptick in prices, the Fed’s concerns appear valid,” said Quincy Krosby at LPL Financial. “Above all else, they don’t want to repeat the mistake of monetary policy from the 1970’s, which opened the door to stagflation and the need for much higher interest rates to expunge seemingly embedded inflation.”

JPMorgan Chase & Co.’s Marko Kolanovic, who drew attention for his gloomy stock-market calls through last year’s rally, is raising a risk that’s mostly gone out of vogue on Wall Street — a return of 1970s-style stagflation.

Treasury yields climbed after a $16 billion sale of 20-year bonds. 

Corporate Highlights:

• Rivian Automotive Inc. revealed plans to cut 10 per cent of its salaried workforce and set production guidance well below Wall Street’s expectations as the maker of electric vehicles grapples with stagnant demand and economic turbulence.
• Intel Corp. has landed Microsoft Corp. as a customer for its made-to-order chip business, marking a key win for an ambitious turnaround effort under Chief Executive Officer Pat Gelsinger.
• Cisco Systems Inc. is selling $13.5 billion of bonds in the US high-grade debt market to partly finance its proposed $28 billion acquisition of Splunk Inc., as issuers rush to capitalize on strong investor demand.
• Boeing Co. ousted the head of its 737 Max program after a midair blowout of a fuselage panel on an Alaska Airlines jet led to withering scrutiny of the manufacturing quality of the planemaker’s most important model.
• Luxury homebuilder Toll Brothers Inc. said it’s optimistic about its prospects for a key selling season.
• HSBC Holdings Plc reported fourth-quarter profit fell 80 per cent after taking unexpected charges on holdings in a Chinese bank and from selling its French retail operations. Shares slid in London.
• Palo Alto Networks Inc., a cybersecurity company, cut its annual revenue forecast, stoking concerns that customers are reining in spending despite an uptick in attacks.
• Mercedes-Benz Group AG plans to buy back as much as €3 billion ($3.2 billion) worth of stock, extending moves to reward shareholders after cash flow exceeded expectations.

Key Events This Week:

• Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, CPI, Thursday
• US initial jobless claims, US existing home sales, Thursday
• ECB issues account of January meeting, Thursday
• Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkari speak, Thursday
• China property prices, Friday
• Germany IFO business climate, GDP, Friday
• ECB publishes 1- and 3-Year inflation expectations survey, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.1 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 0.4 per cent
• The Dow Jones Industrial Average rose 0.1 per cent
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0818
• The British pound was little changed at $1.2634
• The Japanese yen fell 0.1 per cent to 150.19 per dollar

Cryptocurrencies

• Bitcoin fell 2 per cent to $50,990.31
• Ether fell 2.7 per cent to $2,908.32

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.32 per cent
• Germany’s 10-year yield advanced eight basis points to 2.45 per cent
• Britain’s 10-year yield advanced six basis points to 4.10 per cent

Commodities

• West Texas Intermediate crude rose 1.3 per cent to $78.04 a barrel
• Spot gold was little changed