Nvidia brings recent life to 'FOMO' AI trade, stock market rally

The AI trade is back in full force after Nvidia’s (NVDA) big earnings beat, defying fears that euphoria over the technology can have reached its peak.

Shares of Soundhound (SOUN) and Arm (ARM), corporations Nvidia recently revealed it invested in, each rose on Thursday. AMD (AMD), one other AI chip play, rose nearly 10% while AI-driven stock Palantir popped nearly 3%. Super Micro Computer (SMCI), which has been on a meteoric 200% rise this 12 months, soared nearly 20% on Thursday alone.

The reach of Nvidia’s success was seen beyond just the tech space. The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) touched recent intraday record highs lower than half-hour after the opening bell on Thursday. A slew of other corporations that are not AI focused, including JPMorgan (JPM) and Waste Management (WM), also touched fresh highs throughout the session.

All of those moves higher come just every week after a hotter-than-expected inflation report spawned a mini-market sell-off and as Federal Reserve officials proceed to point rate of interest cuts are prone to come later than many hoped. Normally, those two headwinds are large enough to drive the market motion. Not on Thursday.

To Evercore ISI’s Julian Emanuel this resilience shown by the market amid major macro headwinds and high stock valuations has been simply “impressive.”

“FOMO operates by itself timetable, stocks can get dearer, and the Momentum ends when it ends, which is usually all at once,” Emanuel said. “FOMO, for now, Stays Bid.”

Nvidia CEO Jensen Huang said Wednesday night that AI hit a “tipping point” as demand continues to surge. These comments — and the corporate’s quarterly earnings overall — were like “jet fuel” to the bull thesis in tech, Wedbush Securities managing director Dan Ives said in a note to clients.

The looming market query stays how long this euphoria can last. Thursday’s market motion shows it still has legs for now.

“The underside line is I feel it’s too early to call it a bubble peak in AI,” Fundstrat head of research Tom Lee told clients on Wednesday night.