As of Friday's U.S. stock market close, the world's seven most valuable tech giants pushed the Nasdaq 100 index to a record high, rising an astonishing 52% so far in 2023, and the index is even on the verge of its best year since 2009, Zhitong Financial APP has learned. Overall, global investors' extreme optimism about artificial intelligence (AI) can be said to have fully overwhelmed concerns about the impact of the Federal Reserve's interest rate hike in 2023, and investors have high expectations for the technology industry, stimulated by the global trend of generative AI, which directly drove the cumulative triple-digit gains of the seven major US tech giants (Magnificent Seven).
At the close of trading on Friday, the Nasdaq 100 rose 0.52% to 16,623.45, surpassing its peak closing of 16,573.34 in November 2021. The risk on momentum in the U.S. stock market has only increased since January, and the index is on track for its fastest year since 2009. According to data compiled by institutions, the "junk-grade bond ETF" in the U.S. stock market has seen an unprecedented inflow of more than $15 billion in the past six weeks, reflecting the sharp increase in investors' risk on.
Nvidia (NVDA. US) is arguably the hottest investment target in the global stock market in 2023, and thanks to the artificial intelligence investment frenzy triggered by the emergence of ChatGPT last year, Nvidia's stock price has performed exceptionally well in 2023. Since the beginning of this year, Nvidia's stock price has risen by a staggering 240%. This achievement not only allowed the stock to easily outperform the S&P 500 (S&P500), the benchmark index for US stocks, but also led the year's gains among the seven tech giants. The seven Magnificent Seven in the U.S. stock market include Apple, Microsoft, Google, Tesla, Nvidia, Amazon and Meta Platforms.
No other tech company has demonstrated the enthusiasm for investing in artificial intelligence like Nvidia, and has actually delivered on analysts' expectations of revenue and the company's earnings promises. The company's 240% gain to date makes it the best performer in the Nasdaq 100 and S&P 500 indices. In addition, the "Big Seven" of US stocks is weighted more heavily in the S&P 500 than ever before.
Here's the chart that best sums up the U.S. tech stock trend this year, largely reflecting analysts' overall bullish views on Nvidia's share price rally, the Nasdaq 100 hitting a new closing high, the dominance of the Big Seven tech giants and AI-related tech stocks, and the high valuations of the tech sector.
While there is still a great deal of debate about whether Nvidia's stock price is too expensive or just right, one thing is certain: Wall Street analysts generally believe that the unprecedented profit spike that drove Nvidia's stock price up won't end in the short to medium term; The tech giant is expected to make a profit of about $48 billion over the next 12 months, up from just about $10 billion expected at the beginning of the year.
As it turns out, the steady upward trend in benchmark U.S. interest rates for much of the year has not posed the same huge threat to tech valuations as many imagined last year. Conversely, the Nasdaq 100 continued to rise, even though the 10-year Treasury yield remained above 4% for most of the year. Rising profits pushed most tech stocks higher after companies laid off tens of thousands of jobs and reined in spending.
The Nasdaq 100 had its best first-half performance in U.S. equity history, and in November, the index recorded an increase of about 11%, the highest monthly gain since July 2022. This week, the Federal Reserve unexpectedly expressed a dovish stance, emphasizing that the interest rate hike cycle has basically ended, and began to discuss the timing of interest rate cuts, and the momentum of US technology stocks Risk On has further strengthened.
Apple (AAPL. US), Microsoft (MSFT. US), Google's parent company Alphabet (GOOGL. US), Amazon (AMZN. US), Nvidia (NVDA. US)、Meta(META. US) and Tesla (TSLA. US) The seven largest technology and internet-related stocks by market capitalization had a record 29% of the S&P 500's combined weight in November. Investors have flocked to the Big Seven this year, in part because they are betting that they are in the best position to leverage AI technology to expand their revenues due to their sheer market size and financial strength. This group accounts for about two-thirds of the index's 23% rise in 2023.
The Big Seven tech giants are more influential than ever
Top tech stocks rose the most – a handful of stocks drove most of the Nasdaq-100's returns in 2023
The larger profit growth of these tech giants has led to a rapid decline in the overall forward price-to-earnings ratio of US tech stocks from their previously unattainable levels, but their valuations are still very high. Data compiled by agencies shows that the Nasdaq-100 is trading at an expected price-to-earnings ratio of around 25x over the next 12 months. While this is down from the 30x historical peak touched in 2020, it is well above the average valuation of 19x over the past 20 years.