The Nasdaq experienced one of its strongest rallies of 2024 on Thursday, surging 2.5% as investors flocked to tech stocks following the Federal Reserve’s first interest rate cut since 2020. Tesla and Nvidia led the charge, with Tesla shares climbing 7.4% and Nvidia jumping 4%, boosting the tech-heavy index to its fourth-largest gain this year. The biggest surge occurred on February 22, when the Nasdaq rose by 3%.
Tech stocks tend to benefit from lower interest rates due to reduced borrowing costs and more favorable investment conditions. The Fed’s half-point rate cut, along with indications of further reductions by the year’s end, created a bullish environment for tech stocks. The central bank’s “dot plot” suggests another 50 basis points of cuts before 2025, potentially reducing rates by 2 percentage points overall.
Thursday’s rally lifted the Nasdaq to 18,013.98, its highest point since mid-July and only 3.5% below the 2024 peak of 18,647.45, reached on July 10. Nvidia, a key player in the artificial intelligence (AI) revolution, closed at $117.87, up 4%. The company’s processors are fueling the rise of generative AI and tools like OpenAI’s ChatGPT. Nvidia’s stock is up around 138% this year, although still 13% below its all-time high from June.
Nvidia’s impressive growth is largely driven by major customers such as Microsoft, Meta, Alphabet, Amazon, Oracle, and OpenAI, which use its technology to develop large language models and manage substantial AI workloads. However, lower interest rates are expected to further bolster Nvidia’s stock performance.
Other chipmakers saw gains as well, with Advanced Micro Devices (AMD) up 5.7% and Broadcom rising 3.9%. While AMD is still trailing Nvidia in the AI race, its CEO, Lisa Su, emphasized that AI is a long-term game. Speaking with CNBC’s Jim Cramer, Su pointed out that the widespread adoption of AI is still in its early stages, and its impact will be seen in fields like education and healthcare over time. “We all use it, and we’re all learning,” she said.
Tesla was the standout among the tech megacap companies, posting a 7.4% gain on Thursday. Despite this jump, the electric vehicle maker has struggled in 2024, with its stock down nearly 2% for the year. However, Tesla is up 72% from its lowest point in April. Other tech giants, including Apple and Meta, also saw strong performances, both closing with nearly 4% gains.