Nvidia brings new 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 may have reached its peak.

Shares of SoundHound (SOUN) and Arm (ARM), companies Nvidia recently revealed it invested in, both rose on Thursday. AMD (AMD), another 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 year, 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 new intraday record highs less than 30 minutes after the opening bell on Thursday. A slew of other companies that aren’t AI focused, including JPMorgan (JPM) and Waste Management (WM), also touched fresh highs during the session.

All of these moves higher come just a week after a hotter-than-expected inflation report spawned a mini-market sell-off and as Federal Reserve officials continue to indicate interest rate cuts are likely to come later than many hoped. Normally, those two headwinds are large enough to drive the market action. 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 on its own timetable, stocks can get more expensive, and the Momentum ends when it ends, which is often without warning,” 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 company’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 question remains how long this euphoria can last. Thursday’s market action shows it still has legs for now.

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