Strong investor interest in AI-related stocks

BY Janne Muta

|May 29, 2023

The US equities gained on Friday as investors kept on pouring money into the big tech names with the hope of those stocks gaining on AI-frenzy. The DJIA (Dow Jones Industrial Average) increased by 1.00%, and the S&P 500 by 1.30%. The best performer though was Nasdaq Composite which rallied 2.19%. The UK's FTSE 100 experienced a more modest increase of 0.65% while the German DAX climbed 0.98%. In commodities trading, USOIL saw a gain of 1.49%, while XAUUSD showed a smaller increase of 0.33%. In the FX market, the JPY weakened by 0.41% against the US dollar, and the Euro started to stabilise against the US dollar after a tree week downtrend. The EURUSD pair finished the day unchanged.

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Nvidia's impressive rally last week has brought its market capitalization close to $1 trillion. The surge in the stock reflects the unusually strong investor interest and confidence in AI-related stocks. While valuations of AI-related companies like Nvidia, Microsoft, and Meta are relatively high compared to the S&P 500's average multiple, the US stock market isn’t yet in a bubble stage. Instead, it suggests that we may be witnessing the early stages of a major rally in AI-related stocks.

Accordion to WSJ, one factor contributing to the ongoing rally in blue-chip stocks is the limited supply of initial public offerings (IPOs). With a scarcity of opportunities in the IPO market, investors are increasingly drawn to established blue-chip companies that are leading in the AI field. This demand for AI investments has outpaced the available market cap, fueling the upward momentum in these stocks.

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Dax is bullish above 15 976 and as such likely to trade up to 16 170. Below 15 976, look for a move to 15 860.

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Silver is bullish above 23.00 and probably trades to 23.53 if the upside momentum is sustained. Below 23.00, a move to 22.60 looks likely.

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USDJPY is bullish above 139.50 and could trade to 141.50. Below 139.50, the market probably trades down to 138.80.

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NZDJPY could be turning bullish. If there’s a decisive break above 85.25, look for a move to 86.80. Otherwise, the market probably trades down to 84.20.

The Next Main Risk Events

  • EUR Spanish Flash CPI
  • USD CB Consumer Confidence
  • AUD RBA Gov Lowe Speaks
  • CNY Manufacturing PMI
  • CNY Non-Manufacturing PMI
  • EUR German Prelim CPI
  • EUR ECB Financial Stability Review
  • USD JOLTS Job Openings
  • CHF SNB Chairman Jordan Speaks
  • USD FOMC Member Harker Speaks
  • EUR CPI Flash Estimate
  • EUR Core CPI Flash Estimate
  • EUR ECB President Lagarde Speaks
  • USD ADP Non-Farm Employment Change
  • USD Unemployment Claims
  • USD ISM Manufacturing PMI
  • USD ISM Manufacturing Prices
  • USD FOMC Member Harker Speaks
  • USD Average Hourly Earnings
  • USD Non-Farm Employment Change
  • USD Unemployment Rate

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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