The resurgence of the "AI Faith" is causing a huge wave! Is the script of the "Crazy Bull Market" in the US stock market in 2023 playing out again?

Zhitong App has learned that NVIDIA, a chip giant known as the "strongest shovel seller" in the AI field, has once again delivered a tremendously strong quarterly performance and outlook that significantly exceeds market expectations. This may reignite a frenzy of comprehensive investment in the US stock market on Wall Street, as the "AI faith" sparks another round of "bull market" in US stocks.

According to a report from the stock trading department led by Andrew Tyler, the head of market intelligence at J.P. Morgan, before the opening of the US stock market on Thursday, this outcome is likely to drive a strong bullish sentiment towards the US stock market on Wall Street. The positive catalyst from NVIDIA's performance will overshadow recent rumors about when the Fed will start cutting interest rates.

Indeed, global investors are driving the benchmark stock index of US stocks - the S&P 500 Index - to achieve the largest single-day increase since November last year, rising over 2% to 5087.03 points on Thursday, hitting a historical high during the trading session. The NASDAQ-100, dominated by the hottest tech stocks, also surged over 3%, approaching the recent historical high.

This time last year, NVIDIA stunned global investors with a performance that signaled the beginning of a global tech frenzy around generative AI technology, leading to a violent rebound of 25% for the S&P 500 Index in 2023, and a staggering 55% surge for the "tech stock barometer" NASDAQ-100. This year, NVIDIA's explosive performance indicates that NVIDIA will lead the global AI revolution, the trend of large-scale data centers shifting towards GPU systems, and the "big bang wave" of innovative AI applications like Sora is just beginning. A new round of "bull market" in US stocks is on the horizon.

In the face of the "AI faith," even the expectations of a Fed rate cut have to take a back seat.

In the early hours of Thursday Beijing time, NVIDIA once again announced a tremendously strong quarterly performance and outlook that significantly exceeded market expectations. The soaring demand for NVIDIA AI chips across various industries has led this tech giant to shock the world once again with strong performance, following three previous quarters. The core business department of NVIDIA, which provides A100/H100 chips for global data centers - the data center business department, has been the top-performing department for several quarters. The revenue generated by the data center business in Q4 reached $18.4 billion, a staggering increase of about 409% compared to the same period last year. NVIDIA expects its total revenue for Q1 of the fiscal year 2025 (ending in April 2024) to reach around $24 billion in the performance outlook section, a significant increase compared to the Wall Street analysts' average forecast of $21.9 billion. This incredibly strong performance outlook highlights NVIDIA as the prime beneficiary of the global AI trend, earning the title of the "strongest shovel seller" in the AI field.

Following the explosive performance announcement by NVIDIA, its stock surged over 16% to $785.38 at the close of the U.S. stock market on Thursday. The U.S. tech stocks, especially the chip sector, collectively surged, and on the same Thursday, major tech stocks in Europe and Asia, particularly chip stocks, soared across the board driven by NVIDIA's earnings report.

Therefore, NVIDIA, the "strongest shovel seller" in the AI chip sector, single-handedly revitalized the "AI faith" of global tech stock investors. The faith in AI among tech stock investors may once again create significant waves in the global stock market. The influence of "AI faith" on global stock markets, including the U.S. stock market, may surpass the impact of the expected rate cuts by the Federal Reserve.

Traders led by Taylor wrote: "This could be a very influential positive catalyst, not only making Wall Street more bullish on the U.S. stock market, but also witnessing a further decoupling of the stock market from the currently rising U.S. bond yields, as it has been proven that regardless of the interest rate environment, the 'Magnificent 7' led by NVIDIA can meet profit expectations." The Magnificent 7 includes: Apple, Microsoft, Google, Tesla, NVIDIA, Amazon, and Meta Platforms.

Although the Pro UltrPro Shrt S&Pro 500 has repeatedly hit new highs this year, the recent upward trend has stalled and bearish sentiment has resurfaced, mainly due to consumer and producer price indices exceeding expectations, leading traders to significantly lower their expectations for the extent of the Fed rate cuts. Therefore, global funds were cautious before the release of NVIDIA's earnings report. The expected 150 basis points rate cut since the end of 2023 has turned out to be a "pipe dream," and the "steady rate cut pace" of around 75 basis points implied by the FOMC dot plot seems to have become a certainty. Global investors have been eagerly awaiting NVIDIA's earnings, hoping that this report could reignite the strong bullish sentiment that drove the stock market up last year. The soaring market on Thursday indicated that NVIDIA's earnings did indeed ignite market sentiment, reviving tech investors' "AI faith."

This time last year, NVIDIA shocked global investors with its performance, signaling the global tech industry's frenzy around generative AI technology and triggering a "bull market" for Pro UltrPro Shrt S&Pro 500 in 2023, rebounding violently by 25% to reverse the downturn of 2022. This year, NVIDIA's explosive performance tells investors that NVIDIA will lead the AI revolution comprehensively, with the trend of large-scale data centers transitioning to GPU systems just beginning, potentially setting the stage for a new "bull run."

After NVIDIA's strong performance announcement, Wall Street swiftly raised NVIDIA's 12-month target stock price and reiterated "buy" or "hold" ratings. Bank of America reiterated a "buy" rating on NVIDIA, raising its target price from $800 to $925; Citigroup raised its target price from $575 to $820; Cantor Fitzgerald raised NVIDIA's target price from $775 to $900.

Some institutions even expect NVIDIA's stock price to exceed $1,000 in the next 12 months. Bernstein raised NVIDIA's target price from $700 to $1,000; Melius Research raised its target price from $925 to $1,000; Benchmark raised its target price from $625 to $1,000.

"This is a microcosm of the market," said Keith Buchanan, Senior Portfolio Manager at GLOBALT Investments. "We have been wondering if performance can meet this moment, as with most factors, as market sentiment explodes. NVIDIA's rhythm is still ongoing."

Taylor-led J.P. Morgan's stock trading department also reiterated their "tactically bullish" view on the U.S. stock market, citing strong U.S. economic growth, optimistic earnings of tech companies led by NVIDIA, and the Federal Reserve's plan to ease monetary policy this year.

However, Taylor and his colleagues in the trading department noted that due to negative seasonal factors at the end of the month, U.S. stocks may experience a short-term pullback at the end of February. Nevertheless, they stated that for the U.S. to see a more significant decline, the macroeconomic and fundamental background must deteriorate sharply. They lean towards being long on U.S. tech stocks and some cyclical sectors, including large banks, credit card issuers, home builders, transportation companies, and retailers.

NVIDIA Leads Tech Stocks Soaring, Pro UltrPro Shrt S&Pro 500 Hits Another Record High!

NVIDIA's incredibly strong performance has reignited investors' belief that breakthroughs in artificial intelligence will boost tech companies' profits and drive further gains in benchmark stock indices. The three major U.S. stock indices all surged on Thursday, with the Pro UltrPro Shrt S&Pro 500 once again hitting a historic high. Since 2024, this index has repeatedly set new records, while the Dow Jones Industrial Average, which includes large blue-chip stocks, also reached a new all-time high.

The stellar performance of this trillion-dollar chip giant has sparked bullish sentiment across Wall Street, propelling the Pro UltrPro Shrt S&Pro 500 to its 12th highest closing record since 2024, with a cumulative increase of nearly 24% since the end of October. The Dow Jones Industrial Average, widely regarded as a barometer of the U.S. economy, surpassed 39,000 points for the first time. Additionally, the MSCI ACWI index, covering developed and emerging market stocks, also reached a historic high.

Since late January, the Pro UltrPro Shrt S&Pro 500, NASDAQ-100, and Dow Jones indices have been setting records simultaneously - a feat not seen since November 2021.

Michael Bailey, research director at FBB Capital Partners, stated: "We see high-growth, high-profit tech giants breaking new ground in profit creation, and investors are rewarding this beautiful new world." "In short, the new highs are in the right neighborhood, but perhaps investors are paying a slightly higher price to live in this trendy neighborhood."

During Thursday's U.S. trading session, NVIDIA's market value increased by nearly $280 billion, marking the largest single-day market value gain in history, surpassing the $197 billion increase created by Facebook's parent company Meta (META.US) earlier this month. This is equivalent to adding an entire Netflix or Adobe, or close to half a JPMorgan Chase or two Goldman Sachs.

In just this year alone, chip giant NVIDIA's market value has increased by over $700 billion, reaching $1.9 trillion, surpassing tech titans Amazon (AMZN.US) and Google's parent company Alphabet (GOOGL.US) in the U.S. stock market. NVIDIA's strong rally has boosted the stock prices of other chip companies, including its biggest competitor AMD (AMD.US), as well as Marvell Technology (MRVL.US) and Broadcom (AVGO.US) among other major chip companies. The Philadelphia Semiconductor Index, known as the "global chip stock barometer," rose by 5%, marking its best performance since May last year.

However, the rally is not as widespread as the bulls had hoped. Only 73% of the components of the Pro UltrPro Shrt S&P 500 index rose on Thursday, mainly concentrated in the technology sector. In the past 11 trading days with a single-day increase of over 2%, at least 90% of the index's components have risen.

Scott Colyer, CEO of Advisors Asset Management, said, "The feeling before the hangover is always the best." "As only a few stocks are driving the index higher, we should have had a pullback earlier. But before a serious sell-off, we may still see this rebound continue, as we have not seen more stocks hitting new lows."

Joe Mazzola, head of trading at Charles Schwab & Co., said, "The confidence level in the U.S. stock market has been very stable, with no significant differences in traders' decisions. Market concerns about an economic recession have significantly decreased, largely due to some positive economic data."

Regarding the future market trend of the Pro UltrPro Shrt S&P 500, Wall Street investment institutions generally hold a bullish view. Recently, UBS raised its year-end target for the Pro UltrPro Shrt S&P 500 to 5400 points (as of Thursday's U.S. market close at 5087.03 points), the highest expectation among major Wall Street banks.

Goldman Sachs strategist David Kostin's team now expects the Pro UltrPro Shrt S&P 500 to rise to 5200 points by the end of this year, about 2% higher than the level of 5100 points he predicted in mid-December.

"The main driving factor for this adjustment is profit expectations, especially the upward revision of profit expectations for the seven major tech giants," said Kostin's team at Goldman Sachs. Other major Wall Street banks, such as Bank of America, have also hinted that considering the optimistic sentiment of global investors, there is still room for upward adjustment in the expectations for the Pro UltrPro Shrt S&P 500, with the year-end target likely to be revised upwards.