NVIDIA Rises 9% as AI Trading Recovers, S&P 500 and Nasdaq Gain

Article by: Tide Research

On Thursday, U.S. equities rallied across the board, with the Nasdaq leading gains, rising 1.57% to close at 26,541.352. The S&P 500 advanced 0.72% to 7,730.99, while the Dow Jones Industrial Average climbed 0.20% to 53,569.44. The VIX stood at 14.90, down 1.65%. The Philadelphia Semiconductor Index rose 2.33% to 11,882.17, and the Nasdaq-100 gained 1.43% to 29,641.56. The rally was primarily driven by a renewed surge in AI-related trading enthusiasm; NVIDIA surged nearly 9% on its first trading day following its earnings report, adding nearly 3 trillion yuan in market value overnight. Software stocks collectively surged, with Salesforce posting its best performance in six years. However, U.S. Treasury yields continued to rise, with the 10-year yield climbing to 4.68%. Three Federal Reserve officials warned on the same day that interest rates may still be too accommodative and that inflationary pressures remain a concern. Federal Reserve Chair Powell’s speech at tonight’s Jackson Hole symposium will be critical for markets in assessing the interest rate trajectory for September.

NVIDIA was the primary driver of Thursday's market. Following the release of its Q2 revenue of $96.2 billion, which exceeded expectations, a first-ever guidance exceeding $1 trillion for the current quarter, and a 70% revenue growth forecast for the next fiscal year, capital continued to flow in on the first trading day after the announcement, pushing its market cap up by approximately 3 trillion yuan in a single day. While the earnings themselves surpassing expectations were significant, what truly fueled sustained capital inflows was the 70% revenue growth guidance for the next fiscal year—demand for AI chips has yet to show any signs of peaking.

The chip index rose over 2%, outperforming the broader market. Marvell Technology reported second-quarter earnings, with revenue increasing 37% year-over-year to $2.74 billion; data center revenue rose 46% to $2.2 billion. Its third-quarter revenue guidance of $3.15 billion significantly exceeded expectations. However, Marvell’s stock has already surged 184% this year, pushing market expectations to extremely high levels, causing its shares to drop about 1.7% in after-hours trading. Despite beating earnings estimates, the stock failed to rise—a common issue facing the AI hardware supply chain, where valuations have outpaced fundamentals.

The Magnificent Seven closed higher overnight. NVIDIA rose 8.93% to $228.39, Apple increased 0.40%, Microsoft gained 0.15%, Google rose 0.35%, Amazon climbed 1.52%, Meta advanced 0.74%, and Tesla rose 1.29%. Collectively, the Magnificent Seven rose approximately 1.5%, aligning with the direction of the Nasdaq.

Beyond AI hardware, the software sector was another standalone theme on Thursday. Salesforce rose nearly 23%, posting its best performance in six years. Strong third-quarter guidance and the announcement of an expanded partnership with Anthropic directly alleviated market concerns about a "software apocalypse." Okta surged nearly 30%, CrowdStrike rose over 20%, and software stocks collectively rallied, with capital flowing into AI hardware, application layers, and software services alike.

Hugging Face has released Microduck, an open-source robot made in China, priced at $399, standing about 25 cm tall and weighing less than 800 grams, capable of walking and rollerblading, and trainable in new skills via reinforcement learning. After opening pre-orders, it sold one unit every four seconds. NVIDIA acquired Hugging Face for $12.9 billion, valuing it at approximately 80 times its annualized revenue, aiming to control a core node in the open-source ecosystem. SoftBank plans to take a controlling stake in the humanoid robotics company 1X for $6 billion, with Masayoshi Son positioning "physical AI" as SoftBank’s next strategic frontier.

The narrative around AI is unfolding simultaneously at three levels—chips, models, and applications—with capital being allocated across all three directions.

Oil prices moved in the opposite direction from the previous trading day. Reports indicated that after the White House rejected reviving the preliminary ceasefire agreement reached with Iran in June, both crude oil and the 10-year U.S. Treasury yield hit daily highs. Brent crude briefly rebounded above $90, rising nearly 3%, reversing a three-day decline alongside U.S. crude. WTI crude futures closed up 1.58% at $83.53 per barrel, while Brent crude futures closed up 2.12% at $89.70 per barrel.

Geopolitical signals are becoming more complex. Diplomatic mediation by Iran and Oman is showing initial results, with shipping volumes through the Strait of Hormuz recovering to 75% of pre-war levels. However, news that the White House has rejected reviving the ceasefire agreement has offset some of the easing expectations. The U.S. is reportedly close to finalizing a "large-scale" agreement targeting equity in Venezuela’s 90-million-barrel oil reserves. Brent crude has still fallen over 6% this week, and the overall trend in geopolitical risk premiums remains downward.

There is a linkage between the rebound in oil prices and the rise in U.S. Treasury yields: higher oil prices have reignited inflation concerns, further pushing up long-term interest rates. The macroeconomic headwinds have not disappeared due to the strength of AI; two main forces are currently pulling against each other.

Pressure on interest rates is accumulating in tandem. The 10-year U.S. Treasury yield is at 4.683%, up about 3 basis points on the day; the 2-year U.S. Treasury yield is at 4.232%, up about 2 basis points on the day.

Three Federal Reserve officials issued hawkish signals on the same day. Kansas City Fed President Schmid stated that current short-term interest rates "may still be in accommodative territory" and bluntly said, "We have more work to do." Cleveland Fed President Hammack noted that current interest rates are not sufficiently restrictive to bring inflation down on their own, urging policymakers to "act now." Boston Fed President Collins stated that, in the absence of evidence that inflation is consistently declining, she would support raising rates.

New York Fed’s Nick Timiraos noted that Treasury Secretary Bentsen is gradually encroaching on the Federal Reserve’s traditional policy domain through measures such as expanding long-term Treasury buybacks and suppressing yields, raising concerns about central bank independence. Bentsen’s timing has been criticized as “price management” and is adding compounded pressure amid internal Fed disagreements over rate hikes. The Treasury’s market-stabilizing actions and the Fed’s rate-hike signals are canceling each other out, leaving markets with conflicting guidance from both sides.

Bitcoin rose back above $80,000 during trading, up more than 3% from its daily low. Ethereum traded at $2,515, up approximately 3.3%. Crypto assets continued to strengthen, driven by renewed enthusiasm for AI-related trading and a weakening U.S. dollar.

Spot gold rebounded, rising over 1% at one point. COMEX gold futures closed up 0.25% at $4,609.7 per ounce. Gold has been trading near $4,600, with rising U.S. Treasury yields pressuring prices, while geopolitical uncertainties and a weaker dollar provided support.

Federal Reserve Chair Powell delivered a keynote speech at the Jackson Hole Symposium (8:00 PM Beijing time on August 28). Following a series of hawkish comments from three Fed officials and a higher-than-expected PCE reading, Powell’s address will be the most critical signal ahead of the September FOMC meeting. Markets are closely watching how Powell responds to Treasury Secretary Bessent’s comments on intervention in the long-term bond market. If Powell emphasizes Fed independence and hints at the need for further rate hikes to combat inflation, U.S. bond yields may continue to rise, pressuring tech stock valuations. If Powell focuses more on economic downside risks and fiscal constraints, the market may interpret this as a signal of a more dovish path for rate hikes.

The key signal from overnight U.S. markets is a full resurgence of enthusiasm for AI trading, but U.S. Treasury yields and the Fed’s hawkish signals remain in play. The independent upward momentum of AI and the macroeconomic pressure from interest rates are operating simultaneously—whose influence prevails will depend on the direction of Waugh’s speech tonight.