The rally was attributed to the expectation that lower interest rates would boost consumer spending and business investment, leading to increased demand for tech products. The Federal Reserve’s interest rate cut, a move aimed at stimulating the economy, has had a significant impact on the tech sector. This is evident in the recent surge in tech stocks, particularly in the semiconductor industry.
Lower interest rates tend to benefit tech stocks because reduced borrowing costs and bond yields make risky bets more attractive. In addition to the central bank’s half-point reduction, the Federal Open Market Committee indicated through its “dot plot” the equivalent of 50 more basis points of cuts by the end of the year, eventually coming down by 2 percentage points beyond Wednesday’s move. Get top local stories in Philly delivered to you every morning. Sign up for NBC Philadelphia’s News Headlines newsletter. While the Nasdaq has been on a steady rise this year, powered by Nvidia and the enthusiasm around artificial intelligence, Thursday’s rally pushed the benchmark to its highest since mid-July. The Nasdaq peaked at 18,647.45 on July 10, and it is now just 3.5% shy of that level, closing at 18,013.98.
The company’s stock price has been on a steady climb since the beginning of the year, driven by strong demand for its GPUs, which are essential for training and running AI models. The surge in demand for GPUs is attributed to the rise of generative AI, a type of AI that can create new content, such as text, images, and audio. Generative AI models like ChatGPT, DALL-E 2, and Stable Diffusion are examples of this technology.
The rally in semiconductor stocks is driven by a confluence of factors, including a potential easing of supply chain constraints, a surge in demand for chips, and a shift in investor sentiment. The easing of supply chain constraints is a key driver of the rally. The semiconductor industry has been grappling with supply chain disruptions for several years, which have led to shortages and price increases. However, recent developments suggest that these disruptions are starting to ease.
The key to unlocking the true potential of AI is a combination of “strong” ethical frameworks and robust data sets, according to Su. Su explained that ethical frameworks are crucial for ensuring that AI is developed and used in a responsible and unbiased manner. He said AI could be used to address social inequalities, but also to reinforce existing inequalities if not carefully managed.
WATCH: Cramer’s interview with AMD CEO Lisa Su