The stock market is always interesting, but this week, when
Nvidia
reported another blowout quarter, was somewhat extraordinary. Here are three things investors should note, along with a look ahead for the coming week.
5000 in the Rear View
The 5000 level for the
S&P 500
is becoming no great shakes. The market closed above 5000 for the third consecutive week, finishing at a record 5089. The index was up 1.7% for the week, more than making up for the prior week’s 0.4% loss.
More than 380 of the stocks in the S&P 500 were up for the week. The index has gained 15 of the past 17 weeks and is up almost 7% so far this year.
Nvidia, Nvidia, Nvidia
Investors can thank Nvidia and excitement about artificial intelligence for a lot of that. Yes, it really is Nvidia’s market, mainly because it makes the semiconductors used for AI models like ChatGPT and its many rivals.
Nvidia stock took off after it reported better-than-expected sales and earnings on Wednesday evening. Through late trading Friday, shares were up about 9% for the week, adding more than $180 billion in market capitalization, or roughly 22% of the entire gain of the market. Shares were worth more than $2 trillion for the first time at points on Friday. The stock closed the session worth about $1.97 trillion.
Despite all those gains, Nvidia stock is cheaper now than it was before disclosing its fiscal first quarter results in May 2023. Before that report, which lifted the stock almost 25% and marked a turning point in Nvidia’s AI rally, the stock traded for roughly 60 times the earnings expected over the coming 12 months, according to FactSet. Now it trades for about 33 times.
Nvidia stock got cheaper while it added some $1.2 trillion in market value. That reflects how far expectations for its earnings have risen.
Nvidia’s shine has rubbed off on lots of other AI-related stocks. Through midday trading Friday, shares of
Arm Holdings,
Advanced Micro Devices,
and
Super Micro Computer
rose 4%, 2%, and 7% for the week, respectively.
Shares of data-center equipment suppliers
Schneider Electric,
Eaton,
and
nVent Electric
were all higher for the week through midday trading. The average gain was about 3.6%.
What About Tesla?
Electric vehicle stocks had themselves a week too, but not a good one. Both
Rivian Automotive
and
Lucid
issued lower forecasts of production than expected, a signal that they anticipate less demand than Wall Street has counted on.
Rivian is looking to make about 57,000 vehicles in 2024, roughly the same amount as 2023, while Wall Street had estimated closer to 66,000. Lucid, meanwhile, is planning to make 9,000 vehicles in 2024, up from about 8,400 in 2023 but far fewer than the some 12,000 analysts had expected.
Rivian and Lucid shares were down about 38% and 19%, respectively, for the week. Shares of
Polestar Automotive
and
NIO
dropped 26% and 12%, respectively.
Tesla
shares lost 4%.
If there is a lesson from those numbers, it’s that the U.S. doesn’t need more luxury EVs. It needs more affordable EVs, such as those Tesla makes.
What’s Coming?
The week ahead won’t feature earnings from the likes of Nvidia, so the focus could shift back to the strength of the economy, consumer spending, and inflation. Earnings from
Macy’s
and Lowe’s are expected on Tuesday, along with a reading on consumer confidence from the Conference Board. The personal consumption expenditures price index, an inflation metric, arrives on Thursday.
Strong consumer spending, plus inflation data showing progress in the Federal Reserve’s fight to rein in prices, would go a long way in helping the S&P 500 to rally for another week.
Write to Al Root at [email protected]
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