The tech sector has firmed recently due to building optimism around Nvidia (NVDA) earnings. Following the company’s strong results and upgraded guidance, the shares jumped above $500. The 10% advance was exactly what the options market had priced in before the announcement, writes Eoin Treacy, editor at Fuller Treacy Money.
These results cement Nvidia as the go-to artificial intelligence stick. It is viewed as the single-best way to invest in the sector and that will remain the case until sales begin to underwhelm. Several of the company’s customers are designing their own chips, but that is a medium-term threat.
Microsoft (MSFT) also continues to firm from above the 200-day MA and has also been supported by its eager embrace of the artificial intelligence theme.
Ahead of the earnings announcement, the FANGMANT/NYSE Total Market Cap ratio was back testing the upper side of its short-term range and continues to hold the breakout from the 2020-22 range. It is reasonable to conclude this bull market will not be over until those eight companies lose their ability to outperform so robustly.
Meanwhile, the trend of rising rates damped down speculative activity in the IPO market in 2022. Now, with expectations that central bank hiking cycles are nearing an end, enthusiasm is rising once more. The scale of the moves in the IPO market is much more concentrated at present, which is a reflection both of the smaller number of new listings and tightening liquidity.
