Dow Jones futures rose 0.17% during Thursday’s European trading session, trading around $52,710. Meanwhile, S&P 500 futures and Nasdaq 100 futures rose 0.34% and 0.74%, trading around 7,550 and 29,690, respectively.
U.S. stock futures rise on the back of a sharp rebound in the tech and AI sectors. Tech futures jumped on reports that the Chinese government will allow China’s top AI companies to buy Nvidia’s H200 chips in limited supply. Chinese authorities recently told major companies such as Alibaba, ByteDance and DeepSeek that they may soon receive the necessary permits to procure processors.
But traders worry that rising energy prices could reignite inflation and force the Federal Reserve to raise interest rates sooner than expected. This follows Wednesday’s decline, with the Dow Jones and S&P 500 down 1.09% and 0.28%, dragged by materials, financials and real estate, while the Nasdaq 100 rose 0.2%, along with strong energy and tech sectors.
Minutes from the Federal Reserve’s June meeting, Kevin Warsh’s debut meeting as FOMC chair held June 16-17, highlight a widening rift among policymakers. Some members of the committee predicted that the benchmark interest rate, currently maintained at a target range of 3.50% to 3.75%, would likely end the year unchanged or even lower, while more hawkish members argued that sustained price pressures would necessitate a rate hike by the end of the year.
Frequently asked questions about AI stocks
First of all, artificial intelligence is a field of study that seeks to replicate human cognitive functions, logical understanding, perception, and pattern recognition in machines. Artificial intelligence, often abbreviated as AI, has many subfields, including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition, and expert systems. The ultimate goal of this entire field is the creation of artificial general intelligence (AGI). This means creating machines that can solve arbitrary problems that they have not been trained to solve.
Artificial intelligence has many different use cases. The best known of these is a generative AI platform that uses training on large-scale language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-generated text. Other forms of AI utilize probabilistic techniques to determine the quality or perception of a company. For example, Upstart’s lending platform uses an AI-enhanced credit rating system to determine an applicant’s creditworthiness by searching the internet for data related to the applicant’s career, asset profile, and relationships. Other types of AI use large databases from scientific research to generate new ideas for potential drugs to be tested in the lab. Content aggregators like YouTube, Spotify, and Facebook use AI applications to suggest personalized content to users by collecting and organizing data about their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both AI-focused computer chips and the platforms used by AI engineers to build applications. Many supporters see it as a pick-and-shovel play for the AI revolution, as Nvidia builds the tools needed to implement further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. The company has a large contract with the US intelligence community, using its Gotham platform to sift through data, identify intelligence leads and provide information on pattern recognition. The company’s Foundry products are used by leading companies to track employee and customer data for predictive analytics and anomaly detection. Microsoft (MSFT) has a significant stake in ChatGPT creator OpenAI, but OpenAI is not publicly traded. Microsoft has integrated OpenAI’s technology with its Bing search engine.
After the general adoption of ChatGPT in late 2022, many AI-related stocks began to rise. For example, Nvidia made well over 200% progress in the six months following its release. Wall Street experts soon began to suspect that the market was being engulfed by a new tech bubble. Stanley Druckenmiller, a prominent investor who has invested heavily in both Palantir and Nvidia, said the bubble won’t last just six months. If the excitement around AI does turn into a bubble, he said extreme valuations would last at least two-and-a-half years, or as long as the dot-com bubble of the late 1990s. As of midway through 2023, it’s best to assume that the market is not in a bubble, at least for now. Yes, at the time Nvidia was trading at 27 times estimated sales, but analysts were predicting very strong revenue growth in the coming years. At the height of the dot-com bubble, the Nasdaq 100 was trading at a P/E ratio of 60 times; by mid-2023, the index was trading at a P/E ratio of 25 times.
