A man is seen using an AR headset at the NVIDIA booth at COMPUTEX 2023 in Taipei.
Walid Bellazig | Sopa Pictures | Light Rocket | Getty Images
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There are clear winners in the AI race. Others, however, are bystanders, reaping no benefits – which could have implications for the wider market.
what you need to know today
- US markets trade just after Memorial Day holiday Tuesday was mixed, but the major indexes saw only modest moves. Europe’s Stoxx 600 index fell nearly 1%, led by food and beverage stocks, which fell 2.7%.
- So close, but so far: On Tuesday, Nvidia’s market cap briefly hit $1 trillion. But the chipmaker’s shares lost momentum and fell during the session, closing with a market capitalization of $990 billion. Still, that’s nothing to scoff at: Its stock is at a 52-week high.
- Elon Musk met with Chinese Foreign Minister Qin Gang on Tuesday. Musk praised China’s achievements, while Musk’s electric car company Tesla opposed “decoupling” with China, according to a statement from the country’s foreign ministry. Tesla did not immediately respond to CNBC’s request to verify the claims — but investors responded by sending Tesla’s shares up 4.14%.
- China’s economy has not rebounded as strongly from the country’s strict lockdown as many had hoped. Services and consumption rose, but manufacturing and employment fared poorly. As a result, some economists believe that the Chinese government and central bank may stimulate the economy and ease monetary policy.
- A deal to suspend the U.S. debt ceiling is expected to pass the House Rules Committee, as seven of the committee’s nine Republicans look set to approve it. Next, it will go to the House of Representatives for a vote within 24 hours.
- Professional Edition Nvidia’s phenomenal growth has grabbed the headlines of late, but there’s another chipmaker that’s also benefiting from the AI frenzy. Its shares have risen 71% this year and more than 32% on Friday alone.
the bottom line
There are clear winners in the AI race. Others, however, are not so much losers as a bystander who reaps no rewards – which could have implications for the broader market.
First, the winner. Semiconductor companies — especially those involved in making the chips that serve as the brains of artificial intelligence models — have been enjoying massive gains. Nvidia briefly touched a $1 trillion market cap on Tuesday, while other chipmakers like Marvell and Broadcom hit 52-week highs (though their shares closed lower).
Big tech companies also got a boost. Amid the excitement over artificial intelligence, shares of Apple and Microsoft have both soared to their highest levels in a year.
But not everyone is jumping on the bandwagon. In fact, some get off the car before it even starts rolling.Prominent Next-Gen Tech Investor Cathie Wood Sells All of Her Nvidia Stake Ark Innovation ETF January. “However, at 25 times this year’s expected revenue, NVDA is priced ahead of the curve,” Wood said in a Twitter post on Monday.
More critically, the market’s gains have been narrow so far. The S&P 500 has gained nearly 6% over the past three months, but the Invesco S&P 500 Equal Weight ETF has fallen more than 3%.
“We don’t see any signs of broad participation. We don’t see signs of an early cycle in AI,” said Andrew Smith, chief investment strategist at Delos Capital Advisors in Dallas. Javed Mirza, a technology analyst at Canaccord Genuity, a large Canadian investment firm, warned, This disconnect could cause the market to pull back very quickly.
Meanwhile, the broader economy hasn’t been all that hot. Oil prices fell more than 4% on Tuesday, suggesting traders are less sanguine about global economic growth. On an individual basis, US consumers were also less optimistic about the economy in May than they were in April, according to the Conference Board’s consumer confidence index.
“Their assessment of the current employment situation has seen the worst deterioration,” said Ataman Ozyildirim, senior economic director at The Conference Board. Friday’s employment report for May will paint a clearer picture of the labor market. After all, in the market, expectations may not match reality – a lesson we’ve learned time and time again since last year.
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