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13.12.2024 02:24 PM
Broadcom Corp. (AVGO.O) surprised the market on Thursday by outperforming Wall Street analysts' expectations for quarterly revenue, betting on strong demand for its specialized AI chips that it expects to remain strong in the coming years. Broadcom shares jumped 15% in premarket trading after the announcement.
"Clients are absolutely thrilled about the potential of AI to boost their revenues. "This activity makes Broadcom an attractive alternative for investors looking to capitalize on the AI boom beyond Nvidia," said Dan Coatsworth, investment analyst at AJ Bell.
The optimism generated by Broadcom's guidance has spread to other semiconductor companies. Marvell Technology (MRVL.O) shares rose 5.6%, Micron Technology (MU.O) added 2%, and industry leader Nvidia (NVDA.O) rose 1.1%.
Broadcom's guidance comes amid an impressive rally in the tech sector. On Wednesday, the Nasdaq index surpassed 20,000 for the first time in history, helped by favorable inflation data. The data has fueled expectations that the Federal Reserve will cut interest rates by 25 basis points at its meeting next week.
The Fed has a more than 96% chance of a rate cut at its Dec. 17-18 meeting, according to CME's FedWatch tool. However, analysts warn that the central bank is likely to pause in January, given recent statements from Fed officials about a more cautious pace of monetary easing.
Amid widespread interest in AI, Broadcom is emerging as a major player in the global race for AI dominance. The company offers investors not only confidence in the future, but also an alternative path to participate in the industry's massive transformation.
U.S. futures were showing solid gains in early trading on Friday. As of 5:25 a.m. ET, the Dow E-minis were up 97 points (+0.22%), the S&P 500 E-minis were up 19 points (+0.31%), and the Nasdaq 100 E-minis were up 138.75 points (+0.64%). These numbers reflect persistent investor optimism, particularly in the tech sector.
Wall Street paused yesterday after a recent rally fueled by strong economic data, sending the S&P 500 and Dow slightly lower as they headed for weekly losses. However, the Nasdaq remained on track to end the week in the green, thanks to strong demand for tech stocks.
The current year has been marked by a series of record highs for major indices, largely due to the excitement around artificial intelligence. Investors are pouring into the leaders of the tech sector, seeing them as the engine of future growth and profitability. This strengthens the position of indices such as the Nasdaq, which continue to lead the interest in AI.
November ended on a strong note for US stocks, helped by the US presidential election. Donald Trump's victory injected confidence into the markets, thanks to expectations of business-friendly policies aimed at increasing corporate profits. December started with general positivity, confirming investor confidence in further growth, especially in strategically important sectors such as technology.
Despite temporary fluctuations, the market continues to show high potential. The upcoming Fed interest rate decisions and further integration of artificial intelligence into the business environment promise to maintain interest in the largest tech companies and support confident growth of indices in the near future.
U.S. stock markets ended the trading day lower on Thursday, with the Dow Jones Industrial Average (.DJI) down 234.44 points (-0.53%) to 43,914.12. The broad-market S&P 500 (.SPX) fell 32.94 points (-0.54%) to 6,051.25, and the tech-heavy Nasdaq Composite (.IXIC) fell 132.05 points (-0.66%) to 19,902.84.
The declines were a respite from the impressive rally that earlier this week lifted the Nasdaq above 20,000 for the first time and the S&P 500 to new record highs.
Despite the overall decline, Salesforce (CRM.N) shares rose 1.8%. This happened after analysts at KeyBanc upgraded the company from "sector perform" to "overweight". Investor confidence in Salesforce has been boosted by the prospects of cloud technologies, which continue to be a key driver of business digitalization.
The main driver of the recent growth remains the excitement around artificial intelligence, which is attracting significant investment in tech companies. However, markets now turn their attention to the Federal Reserve (Fed) meeting, which begins next week.
The Fed is expected to decide on a 25 basis point cut in the key rate, which will be the second cut in a row after a similar move in November. This will put the federal funds rate range at 4.25%-4.5%.
However, the real intrigue is not so much about the immediate decision, but about the regulator's further actions. Investors will be eagerly awaiting signals from the Fed about its rate plans for 2025, which could affect the long-term strategies of market participants.
The American market continues to depend on two main factors: the rapid development of AI and the decisions of the central bank. If both drivers maintain positive dynamics, this could support the rapid growth of key indices and consolidate the US leadership in the global economy.
Donald Trump's victory in the presidential election left the markets in doubt. Investors are trying to understand what economic decisions may be made before 2025. Among the key issues is the possible introduction of large-scale import duties. Will such measures be able to stimulate domestic production or, on the contrary, provoke an increase in inflation? And how will the Federal Reserve System (FRS) react to this?
Markets currently expect the Fed to make just two additional rate cuts in 2025. The expectation for the coming week is a quarter-percentage-point rate cut. If that happens, the total easing this year will be 100 basis points, the same amount the European Central Bank (ECB) cut in 2024.
The ECB cut its borrowing costs for the fourth time this year on Thursday, but President Christine Lagarde remained cautious about the policy path ahead. While the door was left open for more cuts in 2025, Lagarde did not make any firm commitments, leaving many market participants confused.
One of the main intrigues remains the possible impact of tariffs and monetary policy on inflation. If Trump does impose broad import restrictions, this could push prices higher, requiring more active action from the Fed. However, if inflation risks are low, the central bank will be able to continue to gradually reduce rates.
The Fed's actions in the US are compared with European trends, where rate cuts have been a response to slowing economic growth. However, the ECB's approach, unlike the Fed's, remains more conservative. This could create a difference in the approaches of the two key economic zones, which will affect global capital flows.
The US economic policy under Trump and the Fed's response to emerging challenges will be the determining factors for the economy in 2025. Given the uncertainty in Europe and the challenges facing the US market, investors are eagerly awaiting signals that will allow them to build long-term strategies.
Investors expect the European Central Bank (ECB) to continue cutting interest rates in the first half of next year. This forecast is based on a slowdown in economic growth and a return to inflation targets. The deposit rate, according to analysts, could fall to 1.75% by the end of the year. Despite the easing of policy, the ECB's decision on Thursday did not bring any significant changes to market sentiment.
It is not only the eurozone that is on the path to lower rates. This week, the central banks of Switzerland and Canada cut their rates by 50 basis points at once, reinforcing the global trend towards cheaper borrowing. This wave of decisions signals growing caution among policymakers amid unstable growth and moderate inflation.
In the coming days, several central banks will announce their decisions, including Sweden, Norway, the UK and Japan. Attention is also focused on the Fed meeting, where another rate cut is expected. Such decisions shape the global monetary picture, which has a noticeable impact on currency and stock markets.
The currency market is showing a confident strengthening of the dollar amid these events. Over the week, the dollar index has gained about 1%, showing the best result in the last month and the ninth positive week out of 11. The American currency has strengthened against most of its global peers this year, reflecting the stability of the US economy and the aggressive policy of the Fed.
US stock indices continue to grow confidently. The S&P 500 is on track for an annual gain of more than 20%, which is the same as last year. The tech-heavy Nasdaq is again leading the way thanks to impressive successes in the AI sector.
This time, Broadcom is in the spotlight. The company surprised the market with its quarterly revenue forecast, which exceeded Wall Street expectations. This is due to the huge demand for the company's AI chips. Broadcom shares rose 14% before the opening bell on Friday, setting the tone for a new rally in the tech sector.
AI continues to play a key role in the growth of the tech sector. Broadcom, like other major players, is benefiting from the increased demand for innovative solutions. This trend promises to strengthen the position of AI-related companies in the global market, and with them, the main stock indices.
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*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
