The growth sectors, including technology, found relief as Nasdaq on 19 September posted its best day of the year after a much-needed cut to the benchmark interest rate by the Federal Reserve. The Fed rate cut was the first since 2020.
Leadership within the industry by Tesla and Nvidia-although that comes with a slight caveat: Tesla’s stock rallied 7.4%, and Nvidia gained 4% on the day in question, marking this period the culmination of a secular shift for both companies, perhaps especially Tesla, as the stock ran an almost split decision year-to-date rise of 72% from a sub-$200 intra-day low set on April 13.
For all the gameness of that, the rally in tech stocks wasn’t even remotely just about Tesla and Nvidia. Other big players in the industry, including Apple and Meta, rose sharply by about 4 percent each. Lower interest rates are generally good news for tech companies because it reduces the cost of borrowing such companies incur when they are undertaking capital investment for innovation and expansion. The increased demand for AI-powered solutions caused Nvidia’s stock to soar by a whopping 138% in the year that it became the market darling due to its supremacy in the AI area.
After the Fed issued a 50 basis point rate cut, tech stocks finally surged, sending a wave of euphoria across the whole market. Two leaders among them are Nvidia and Tesla. Especially Nvidia has been the front runner for AI and more specifically, for the GPUs that power platforms such as OpenAI’s ChatGPT and other advanced language models. Comparing its overall 2024 performance to Nasdaq at +20% year-to-date gain, Tesla made up for much of the back time in this current rally.
Chipmakers, too, enjoyed a good run with Advanced Micro Devices (AMD) up 5.7% and Broadcom increasing by 3.9%. AMD, though still playing catch-up in the race for AI chips, was helped as much as anyone else by CEO Lisa Su when she said AI is “here for good,” leaving a route open for strong computing power demand down the road.
But this Nasdaq rally is all about enthusiasm for artificial intelligence and other tech innovations-through companies like Nvidia and Tesla. And, as the Fed signaled further rate cuts down the line, the stocks should remain attractive and cheap to finance.
