JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Artificial Intelligence (AI) tech and semiconductor shares rebound
- Apple’s market capitalization hits $5.17 trillion with fresh high
- Nvidia shares drop in post-market after reports of another affair, potential ouster
Technology and semiconductor stocks drove a sharp market rebound Wednesday, powered by CoreWeave’s better-than-expected quarterly results that helped ease worries about artificial intelligence (AI) investment spending.
The three major indices, led by the Nasdaq Composite, snapped back after CoreWeave beat on revenue and raised its full-year guidance. Executives appeared to ease balance-sheet concerns by noting the company will not tap the unsecured debt market at current yields. It will rely instead on customer prepayments, secured financing and operating cash flow to fund its data center buildout. That helped relieve broader investor anxiety about over-investment in AI before returns appear.
The Nasdaq 100 Index’s 2.3% advance drove much of the Nasdaq Composite’s 1.6% gain. The S&P 500 Index closed up 1.3% and the Dow Jones Industrial Average rose 0.49%.
CoreWeave led advancers, closing up 24.7%. Strong gains in other major AI names suggested investors were willing to look past concerns about spending, financing, valuations and even a scandal that pressured Nvidia shares for two sessions. Nvidia rose 2.9%, Broadcom gained 4.0%, Advanced Micro Devices 7.3% and Micron 11.9%. Despite those robust moves, the semiconductor sector, and those four stocks in particular, remain in bear market territory.
In after-hours trading, Nvidia shares were down nearly 8% after the New York Times reported that Chief Executive Jensen Huang — already under scrutiny over an extramarital affair he acknowledged with a woman suspected of being a Chinese spy— had a relationship with an executive who reports to him. The Wall Street Journal then reported that the board is preparing to oust Huang and could meet as soon as Wednesday to decide his future. The situation is fluid, and we may not know more until tomorrow. Stay tuned.
Elsewhere, Apple hit another intraday record high and closed up better than 2%, cementing a market capitalization of about $5.17 trillion. Shares are up more than 31% since the start of the year.
The broad enthusiasm largely overshadowed, at least for one session, the inflation fears that rattled the market Tuesday after the hot Consumer Price Index (CPI) report. October CPI rose 0.4%, above forecasts, and further raised the odds that the Federal Reserve will hike rates by at least 25 basis points in December. However, the CME FedWatch tool put the probability at 87.1%, down from 92.0% Tuesday.
The Cboe Volatility Index® (VIX® Index) fell another 10% to 17.49 as worries eased and buying continued in the stocks that had driven volatility earlier this week and last.
Investors may want to be cautious about today’s robust results. Trading may have been thinner on Veterans Day, when banks and the bond market were closed. Don’t be surprised if sentiment shifts tomorrow, when the bond market reopens and volume returns.
Tomorrow is data-packed, with initial jobless claims, existing home sales and a 30-year bond auction. One Federal Reserve governor and five regional Fed bank presidents are also scheduled to speak, just two days after the CPI report. Investors will likely listen closely for hints on how divided policymakers are and for any commentary on inflation, employment and monetary policy.
Earnings to watch tomorrow include Cisco and Applied Materials, both reporting after the close. They could offer more insight into the health of the technology sector from different perspectives.
On the options front, there’s an implied move of roughly 8% in either direction for Cisco, with heavier volume in the 105 calls and 92 puts. Analysts will be looking at whether margin pressures are growing and what kind of AI infrastructure backlog exists.
Cisco shares ended the session at $100.76, up 2.6%. They are down 14.6% on the month but still up 40.5% on the year.
Options imply a move of roughly 8% for Applied Materials, with recent activity in the 410 calls and 370 puts. Analysts will focus on its exposure to China, which accounted for more than a quarter of its semiconductor systems and services revenue last quarter, and on whether it can keep extending gross margins.
Applied Materials settled at $395.08, up 6%, but remains down nearly 47% from its 52-week high of $739.67 in late June.
Happy Trading!
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