(These are market notes on today’s stock from CNBC senior markets commentator Mike Santoli.) Another clockwork attempt to erase yesterday’s minor index drop, with the usual standard-bearers of the AI construction boom doing the work while stocks closer to the here-and-now consumer remain sluggish. Consider Tuesday’s swings in semiconductor stocks and renewed talk of overlapping untenable supplier/customer relationships between Nvidia, AMD, OpenAI, Oracle, CoreWeave and others as, for now, a day’s pause to release just a touch of pressure from this dominant trade. It seems there are simply too many daily announcements of capital commitments and multi-year spending programs for excessive worry to take hold for long. Nvidia chief Jensen Huang’s soothing, if familiar, words about how he says we’re “early” in the AI story have Nvidia up 2%, accounting for a quarter of the S&P 500’s 0.6% net gain. The bullish follow-up in AMD shares since Monday’s tie-up with OpenAI has been stunning and taking on the appearance of a run up, with the stock gaining more 40% this week. Oracle has regained its full decline since Tuesday’s report on its allegedly unprofitable debut in hosting AI work. As we approach the third anniversary of the start of the bull market and the initial release of ChatGPT, the S&P 500 has compounded at an annualized rate of 24% and returned to a cyclical high of 23 times forward earnings. The mistake of the last six months has been being too sensitive to valuations or wondering whether enthusiasm for AI has crossed the line. This means that fewer investors are repeating these “mistakes”, as the notion of some sort of year-end debacle is becoming a consensus. While the just-released Fed meeting minutes boost the prospect of another rate cut or two this year, sentiment remains firmly anchored to the idea that a second soft landing process of rate cuts within a year is underway. It’s worth noting that consumer discretionary stocks are quietly struggling, even if they haven’t completely collapsed. Real estate, travel, restaurants and retail have been under pressure and the equal-weighted discretionary index is now lagging for the year. This may be linked to the slowdown in labor indicators, which, curiously, has not yet been confirmed by a widespread weakening of overall consumer spending. It’s the bullish thesis that weak job growth allows the Fed to cut rates in an economy that’s not yet showing signs of slowing consumption. Investors explain this by citing a wide divide between wealthy and low-income households and the positive impact of the technology investment craze. Plausible, but not proven. For all the heat surrounding the debate over the relative excitement of the large-cap AI theme – fueled by the world’s strongest companies and other professional sources of capital – speculative aggression on the margins of the market has clearly pushed some boundaries. The notional value of buying call options hits record highs starting in 2021. The Roundhill Meme Stock ETF (MEME) – launched in late 2021, closed in late 2023 – relaunched today with 18 high-velocity, low-quality stocks. Five are quantum computing games, a few are portable nuclear power names and the biggest title is Opendoor, a Class of 2021 home pinball machine. Oh, and Joby Aviation, the EV helicopter company that’s up 200% in a year but is down 10% today thanks to a stock offering. The gold buying frenzy and the talk around the metal is also becoming extreme. Incredibly overbought by several measures with its acceleration above $4,000 an ounce, gold has gone from a doomsday niche asset to a “universal diversifier” in a world wary of public debt, to a story of meteoric momentum. This decision, fueled by many legitimate motivations, seems somewhat self-fulfilling. On a two-year scale, gold and the Magnificent Seven are neck and neck. Both reflect claims on scarce assets deemed immune to macroeconomic currents and global debt dynamics. Or something like that.
The usual standard bearers of the AI boom are pushing the S&P 500 to new heights
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