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Nasdaq Hits Historic 20,000 Mark, Fueled by Big Tech Rally

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The Nasdaq Composite Index (.IXIC) reached an unprecedented milestone on Wednesday, closing above 20,000 for the first time. This historic achievement caps a year of remarkable gains driven by enthusiasm for artificial intelligence (AI) and expectations of declining interest rates. The index climbed 1.8% on the day to close at 20,034.89, marking a more than 33% surge in 2024.

The rally has been propelled by major technology companies, including Apple, Nvidia, Alphabet (Google’s parent company), and Tesla. These tech giants, collectively known as “megacap” stocks, have increasingly dominated the index. Nvidia, in particular, has seen explosive growth, with its shares soaring over 1,100% since their October 2022 low, thanks to its leading role in AI chip production.

Wednesday’s gains were spurred by a U.S. inflation report that reinforced expectations of an upcoming Federal Reserve rate cut. However, the dominance of megacap stocks, which now account for 59% of the Nasdaq’s weighting, raises questions about potential risks if these companies lose investor favor.

The index’s journey reflects resilience and recovery. After tumbling in early 2020 due to the pandemic, the Nasdaq rebounded swiftly as the Federal Reserve slashed interest rates and the U.S. government implemented substantial fiscal stimulus. Although it faced a sharp 33% decline in 2022 amid soaring inflation and aggressive Fed rate hikes, the index has since surged nearly 90%, buoyed by investor excitement over AI’s transformative potential.

Despite its current valuation at 36 times earnings—well above the long-term average of 27—the Nasdaq remains far from the extremes of the dot-com bubble when it reached a price-to-earnings ratio of 70. Analysts suggest that while the recent rally is robust, it appears more sustainable compared to the late 1990s tech boom.

The tech-heavy Nasdaq has outperformed other major U.S. indexes in 2024, with its 33% gain surpassing the S&P 500’s 27% increase and the Dow Jones Industrial Average’s 17% rise. Over the past decade, the Nasdaq has climbed by over 320%, significantly outpacing the S&P 500 and Dow, which have risen 200% and 150%, respectively.

Still, concerns linger over valuation and concentration risks. Cameron Dawson of NewEdge Wealth noted the challenge of sustaining this momentum into 2025 amid high growth expectations and elevated stock prices. The concentration of megacap stocks amplifies the risk of downturns, as evidenced by the steep declines in Meta and Tesla during 2022.

As investors ride this wave of optimism, questions remain about whether the Nasdaq’s remarkable performance can continue, especially as the market’s focus remains on AI innovation and monetary policy shifts.

 

Nvidia Surpasses Apple to Become World’s Most Valuable Company Amid AI Chip Demand Surge

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Nvidia briefly overtook Apple as the world’s most valuable company on Friday, fueled by a record-setting rally in its stock, largely driven by demand for its AI-focused chips. Nvidia’s market value briefly hit $3.53 trillion, slightly outpacing Apple’s $3.52 trillion before settling near Apple’s valuation. This is the second time this year that Nvidia has reached the top spot, previously contending with Apple and Microsoft for global market cap dominance.

The Silicon Valley chip giant’s stock has surged about 18% in October alone, spurred in part by OpenAI’s recent $6.6 billion funding announcement, which renewed optimism for AI technology. Nvidia, originally known for gaming processors, is now the preferred supplier of AI chips in a market led by Microsoft, Alphabet, Meta, and other tech titans. This week, further gains were prompted by Western Digital’s strong quarterly performance, indicating strong demand from data centers.

Amid these successes, Apple faces lukewarm iPhone sales, with a slight dip in China as Huawei’s sales grew 42%. Apple’s Q3 revenue is projected to rise 5.5% year over year to $94.5 billion, compared to Nvidia’s anticipated 82% jump to $32.9 billion, reflecting the rapid growth in AI adoption. Nvidia’s shares, now 190% higher this year, have gained significant traction in the options market, with bullish investors banking on sustained AI demand.

Norway’s Sovereign Wealth Fund Posts $138 Billion First-Half Profit Driven by AI-Boosted Tech Stocks

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Norway’s Government Pension Fund Global, the world’s largest sovereign wealth fund, reported a staggering first-half profit of 1.48 trillion kroner ($138 billion), thanks to significant returns on technology stocks driven by the rising demand for artificial intelligence (AI) solutions. At the end of June, the fund’s value stood at 17.75 trillion kroner.

The overall return for the fund during the first six months of the year was 8.6%, just slightly below its benchmark index. Nicolai Tangen, CEO of Norges Bank Investment Management (NBIM), highlighted that the strong performance was primarily due to the tech sector’s impressive growth, fueled by AI innovations.

The fund’s equity portfolio saw a robust return of 12.5%, while its fixed income and unlisted real estate portfolios experienced marginal losses. However, the fund reported a negative return of 17.7% on its unlisted renewable energy infrastructure portfolio, impacted by higher capital costs during the first half of the year.

Despite the impressive gains, Tangen cautioned that the stock market’s future performance might not replicate the strong growth seen in recent years, citing increased geopolitical risks and global economic uncertainty.

Established in the 1990s to invest Norway’s oil and gas revenues, the sovereign wealth fund has grown to become one of the world’s largest investors, with stakes in over 8,700 companies across more than 70 countries.