Dow Jones futures steady as Nvidia earnings, AI stocks drive focus
- Dow Jones futures hold steady as traders turned cautious ahead of Nvidia’s earnings release.
- MongoDB jumped 30% and Okta gained 5% on AI-driven demand, while Cracker Barrel rose 7% in extended trading.
- US regular markets advanced on Tuesday as traders digested the Trump-Fed feud.
Dow Jones futures remain steady near 45,500 during European hours on Wednesday, ahead of the opening of the United States (US) regular markets. Moreover, the S&P 500 futures and the Nasdaq 100 futures hold ground near 6,480 and 23,590, respectively.
US stock futures move little as traders adopt caution ahead of Nvidia’s earnings release. Expectations are elevated, with Nvidia Corporation (NVDA) shares having gained almost 34% year-to-date. After hours, MongoDB +30% and Okta +5% on AI-driven demand; Cracker Barrel +7% after scrapping logo amid backlash.
In the previous regular US session, the Dow increased 0.3%, the S&P 500 grew 0.41% and the Nasdaq Composite rose 0.44%. US stock markets gained ground as traders digested the escalating feud between US President Donald Trump and the Federal Reserve (Fed).
Fed Governor Lisa Cook is expected to file a lawsuit challenging her removal by President Trump. Trump said, at a Cabinet meeting Tuesday, that he would abide by the court’s decision but signaled little concern over Cook’s challenge.
Stock markets may receive further support as the dismissal of Fed Governor Cook could increase the likelihood of heavy interest rate cuts, given Trump’s ongoing pressure on the central bank to reduce borrowing costs.
The CME FedWatch tool indicates pricing in more than 87% odds for a cut of at least a quarter-point at the Fed’s September meeting, up from 84% previous day. The upcoming release of the Q2 US Gross Domestic Product Annualized and July Personal Consumption Expenditures Price Index data will be eyed later this week.
AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.
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