(Bloomberg) — Nasdaq 100 futures bounced, setting up the technology-heavy index to trim monthly declines, after a blowout forecast from Nvidia Corp. revived the buzz around artificial intelligence.
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Contracts on the Nasdaq 100 were up 1.3% at 4:02 a.m. in New York, while S&P 500 futures jumped 0.6%. Nvidia surged 8% in premarket trading after delivering sales that topped its own lofty projections on the strength of demand for all things AI. Nvidia’s gains alone represent about a quarter of the rally in Nasdaq futures, according to data compiled by Bloomberg. The report also lifted fellow chipmaker Advanced Micro Devices Inc.
Sentiment was also boosted by a pullback in US bond yields after a surge last week amid worries of higher-for-longer interest rates.
“The encouraging Nvidia results and the marked drop in bond yields give equities a strong short-term boost,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “However, I see it as a short-term relief rally. The Jackson Hole meeting and the medium-term bond-yield direction will be more important for markets.”
On track for its worst month of the year and offering investors little reason for optimism just days ago, the Nasdaq 100 now has a chance to shift course as Nvidia’s results allay, for now, worries that tech valuations have become unmoored from reality.
After roaring to its best first half on record amid speculation AI will deliver riches to a host of tech giants, the index slumped for three weeks as investors fretted over the threat of a recession and rising bond yields.
Nvidia’s results show “that betting on AI is paying off today,” said Thomas Monteiro, senior analyst at Investing.com. “This is a big deal because it validates the narrative that has been propping tech stocks in general this year.”
After falling 4% from a peak last month, the Nasdaq 100 is priced at 24 times projected profits for the next 12 months. That’s down from 27 in July, but above a 10-year average of 21.
In addition to Nvidia, the broader tech sector is likely to get a lift from strong results from a trio of software makers Autodesk Inc., Snowflake Inc. and Splunk Inc.
–With assistance from Subrat Patnaik and Jan-Patrick Barnert.
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