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With the Nasdaq Composite hitting an all-time high yesterday, it’s fair to say the market is getting ready for Nvidia’s quarterly results after tomorrow night’s close. Helping boost those expectations and adding a fresh round of fuel for AI were the announcements from not only Nvidia and Dell (DELL) — see more below -- but Microsoft’s announcement of a Surface Laptop and a Surface Pro tablet with a Qualcomm (QCOM) chips that can run some AI tasks without an internet connection. Other computer makers like Lenovo (LNVGY), Dell, HP (HPQ), Asus (ASUUY), Acer (ACEYY), and Samsung (SSNLF) are also launching AI-ready PCs powered by Snapdragon chips from Qualcomm.
This points to an AI-on-device upgrade cycle for connected devices that turbocharger content creation and consumption, forcing incremental spending on digital infrastructure. In short, we see all of these as tailwinds for our Artificial Intelligence and Digital Infrastructure strategies.
Getting back to today, there are no major US economic data releases, but we will have at least six Fed speakers making the rounds. Ahead of Thursday’s Flash May PMI data, that group is likely to repeat Fed speaker messaging of the last few days - more data is needed to become comfortable that inflation is getting back on a downward slope on a sustainable basis. With copper and other commodities hitting their highest levels, in some cases in multiple years, there is reason to think the path to Fed rate cuts may not be as soon as September.
Should the market continue to melt up, both the S&P 500 and the Nasdaq Composite could enter overbought conditions with relative strength indicators crossing above 70. We’re already seeing folks question the current market multiple of 21.8x forward EPS, which almost matches the S&P 500’s peak P/E multiple of the last two years. Moving into overbought territory is likely to fuel even more such questions, putting the focus back on the economy and prospects for even stronger EPS generation than is currently expected.
With the Fear and Greed Index flashing “Greed” and Citi’s Panic-Euphoria model knocking on “Euphoria”, if Nvidia’s earnings and guidance or the Flash May PMI data fail to wow, we could see the market give back some of its high-single-digit gains notched over the last month. Perhaps it would be a good time to revisit our Market Hedge model?
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