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Bargain Hunters Fuel Market Rebound as AI Hype Ignites Tech Stock Revival

AInvestFriday, Jan 3, 2025 6:00 pm ET
1min read

On Friday, U.S. stock markets closed higher as investors, unable to resist the allure of cheaper prices, engaged in bargain hunting after five consecutive days of losses. This series of declines had wiped over $1 trillion off the market capital, marking the longest losing streak since April. The Nasdaq 100 rose by 1.7%, while the S&P 500 gained 1.3%, partially recovering some of the week's losses.

Traders largely ignored warnings about decelerating profit growth among the "magnificent seven" tech giants, rushing to buy shares of NVIDIA, a leader in artificial intelligence. The enthusiasm around AI-driven growth suggested that the trend might continue as retail investors kept channeling funds into AI-related stocks. JP Morgan strategists highlighted that monitoring the Invesco QQQ ETF, tracking the Nasdaq 100, and a leveraged fund providing double daily returns on NVIDIA, could provide insights on retail sentiment.

Market movement reached an intraday high following Mike Johnson's successful re-election as House Speaker, which was perceived as a sign of potential Republican unity in backing pro-business policies under the future administration.

The rebound halted a five-day decline for both the S&P 500 and Nasdaq indices, though it wasn't enough to lift them for the week. The S&P 500 ended the week down 0.48%, the Dow inexplicably lower by 0.60%, and the Nasdaq composite slipped by 0.51%. This development meant that the anticipated "Santa rally," traditionally observed in the last five trading days of a year and the first two of the new year, failed to materialize.

David Lefkowitz from UBS expressed optimism, forecasting further market gains in 2025. He predicted the S&P 500 could reach 6,600 by year-end, driven by a robust 9% profit growth. Conversely, Deutsche Bank cautioned against reading too much into the rocky start of 2025, citing similar initial downtrends in the past two years, both leading to more than 20% annual gains.

In the wake of these milestones, NVIDIA experienced a notable surge in interest as the company anticipated unveiling its foray into the AI PC market at CES 2025. Analyst Vivek Arya noted NVIDIA's plan to provide significant updates to its robotics strategy, aligning with the emerging "physical AI" trend via its Jetson Thor platform.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.