Nasdaq 100 and S&P500: Nvidia Drops, But AI Buzz and Fed Bets Keep US Stocks Afloat
News Summary
Despite Nvidia's 1.3% share price drop following cautious guidance that excluded potential China chip sales, the Nasdaq edged higher. Traders are bracing for Friday’s PCE inflation data, which is seen as a major factor for a potential September Federal Reserve rate cut, with futures pricing in nearly 89% odds of such a move. Amidst this, Snowflake surged 18% after raising its 2026 product revenue forecast, driven by growing AI demand in cloud services. Other tech stocks saw mixed performance, with Broadcom gaining on a price target hike while Super Micro slipped. Overall market sentiment is balancing AI optimism with Federal Reserve easing prospects, though Nvidia's China market uncertainty remains a concern.
Background
Nvidia, as a leading global AI chip manufacturer, has its performance and guidance closely watched as a bellwether for the broader technology, especially artificial intelligence (AI), sector. In recent years, the U.S. government has imposed strict export controls on advanced semiconductor technology to China, compelling Nvidia to develop compliant chips like the H20 for the Chinese market. The U.S. Federal Reserve implemented an aggressive interest rate hike policy throughout 2023-2024 to combat inflation. As inflation data shows signs of cooling, market expectations have largely shifted towards the Fed beginning rate cuts in 2025 to engineer a 'soft landing' for the economy. The Personal Consumption Expenditures (PCE) price index is the Fed's preferred inflation gauge, making its release critical for market interest rate expectations.
In-Depth AI Insights
Is Nvidia's cautious stance on China sales merely a temporary blip, or does it signify a deeper, structural decoupling for the U.S. semiconductor industry? - Nvidia's decision to exclude China sales from its guidance is likely more than just conservative estimation; it reflects the long-term uncertainty stemming from the Trump administration's persistent tech containment policies against China. - This indicates continued pressure on U.S. chip companies' market share in China, forcing strategic adjustments like accelerating localized production or seeking new markets. - From an investment perspective, this could lead to a fragmented AI chip supply chain, spurring the development of indigenous AI chip industries in China and potentially eroding the U.S.'s absolute dominance in the long run. Does the market's near-certain expectation of a September Fed rate cut overlook potential inflation stickiness and geopolitical risks? - While falling jobless claims and rebounding corporate profits support the 'soft landing' narrative, market optimism regarding Fed rate cuts might be overdone. - A higher-than-expected PCE reading would quickly disrupt this consensus, and the Fed's hawkish stance on inflation control, particularly amidst potential political pressures during President Trump's term, will make it more cautious on rate cuts. - In the longer term, global supply chain shocks or geopolitical events (e.g., escalating Middle East conflicts) could still drive up energy and commodity prices, reigniting inflation and delaying the Fed's easing cycle. The surge in cloud service providers like Snowflake due to robust AI demand: Does this mark a new, capital-expenditure-intensive phase for enterprise AI deployment and the sustained appeal of 'picks and shovels' business models? - Snowflake's strong performance and optimistic 2026 forecast indicate that enterprise investment in AI infrastructure (especially data storage, processing, and analytics) is accelerating, suggesting this is not a transient trend. - This reinforces the investment logic of the 'picks and shovels' model, where companies providing underlying technologies and services for AI (e.g., cloud platforms, data services, infrastructure software) will continue to benefit, rather than all AI application-layer companies. - Investors should focus on these infrastructure providers' customer stickiness, pricing power, and economies of scale, rather than just chasing AI concept stocks, to identify the true winners in the AI investment wave.