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Macro

Wall Street Hits Record as Nvidia Market Cap Surges Past $2.5 Trillion

Nvidia's market cap surpasses $2.5 trillion, driving S&P 500 to record 5340.26 and Nasdaq up 1.1%.

5/23, 10:17 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Advanced Micro Devices, Inc.
Amazon.com, Inc.
ASML Holding N.V. - New York Registry Shares
Marvell Technology, Inc.
NVIDIA Corporation
Tesla, Inc.
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Key Takeaway

  • Nvidia's market cap surged past $2.5tn, driven by a 7.6% stock jump following stellar earnings and bullish guidance.
  • S&P 500 hit a record high of 5340.26, while Nasdaq gained 1.1%, fueled by Nvidia's performance and broader tech rally.
  • Fed minutes indicated potential rate hikes if inflation persists, causing some investor unease despite overall market gains.

Nvidia's Blockbuster Earnings

US stock indices surged to fresh all-time highs on Thursday, driven by Nvidia's exceptional earnings report. The S&P 500 rose 0.5% to a record 5340.26, while the tech-heavy Nasdaq Composite gained 1.1%. Nvidia's shares soared 7.6% after the company announced stronger-than-expected earnings, a 10-for-1 stock split, and bullish forward guidance. The chipmaker's revenue skyrocketed 262% over the past quarter, surpassing analysts' expectations, and the company raised its quarterly cash dividend by 150%.

Nvidia's market cap surpassed $2.5 trillion for the first time, making it larger than Amazon and Tesla combined. The company's dominance in the AI chip market has made it a favorite among investors. "There was a lot of hype ahead of earnings and the stock price has already doubled since the start of the year [but] they managed to beat by all counts," said Charles-Henry Monchau, chief investment officer at Bank Syz. The Philadelphia Semiconductor index, which tracks 30 of the world's largest semiconductor manufacturers, rose 2.1% as other chip companies like ASML, Advanced Micro Devices, and Marvell Technology joined the rally.

Fed's Rate Hike Concerns

Despite the market's exuberance, the release of the Federal Open Market Committee (FOMC) minutes from May 1 revealed that US officials are prepared to raise interest rates again if inflation becomes more robust. "Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate," the minutes stated. This hypothetical openness to rate hikes served as a wake-up call for some investors.

Mike Zigmont, head of trading and research at Harvest Volatility Management, noted, "The fact that Fed minutes showed a hypothetical openness to hiking rates again, should inflation remain too high, was a bit of a wake-up call." The Fed kept interest rates at a 23-year high range of 5.25% to 5.5% during the May 1 meeting, a decision unanimously backed by the FOMC members. Markets are currently pricing in between one and two rate cuts by the end of 2024, and expectations did not change after the publication of the minutes.

Nvidia's Market Influence

Nvidia's earnings report was highly anticipated, given its significant influence on market indices and investor sentiment. The company's shares have surged 200% over the past year, adding $1.5 trillion to its market capitalization. "The trajectory of the market in the near term, I think, will be highly correlated to the extent by which Nvidia meets or beats expectations," said Sam Stovall, chief investment strategist at CFRA Research. A miss could be devastating for the market, while a strong showing is expected to keep markets on their upward trajectory.

Piper Sandler analyst Harsh Kumar noted that Nvidia has surpassed revenue expectations by an average of $1.9 billion over the last three quarters. Kumar expects Nvidia to beat revenue expectations this time around by $1.5 billion to $2 billion. "We think all that is sort of like on investors’ minds," Kumar said. "And if they come up with those sort of numbers, the stock will be flat to slightly up, but it won’t be up dramatically because people are already expecting that — they will want to be wowed."

Street Views

  • Charles-Henry Monchau, Bank Syz (Bullish on Nvidia):

    "There was a lot of hype ahead of earnings and the stock price has already doubled since the start of the year [but] they managed to beat by all counts."

  • Mike Zigmont, Harvest Volatility Management (Neutral on market reaction to Fed minutes):

    "The fact that Fed minutes showed a hypothetical openness to hiking rates again, should inflation remain too high, was a bit of a wake-up call... Keep in mind this is totally reasonable and appropriate thinking and scenario planning for the Fed, but there’s something about even seeing the hypothetical in the minutes that bothers some investors."