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In 2024, the top five Big Tech firms—Apple, Nvidia, Microsoft, Amazon, and Google—account for approximately 25% of U.S. equity value, driven by surging AI revenues and a combined market cap of around $15 trillion. This concentration has raised concerns about a potential AI-related asset price bubble, as stock prices have outpaced earnings growth. Investors are now questioning whether these companies can sustain their growth amid evolving market dynamics and competition.
The Dow Jones Industrial Average surged nearly 400 points, reversing a 10-day losing streak, as investors reacted positively to a lower-than-expected inflation report, despite looming government shutdown concerns. Nvidia's stock attempted a recovery, while shares of Trump Media and Technology fell sharply after the president-elect moved shares to a revocable trust. FedEx initially soared over 20% on earnings but later declined, while Carnival's stock rose 3% following better-than-expected quarterly results.
Joe Moglia, former CEO of TD Ameritrade, expresses optimism about the market under a potential Trump 2.0 administration, citing prospects for deregulation and tax cuts that could boost stock prices. He also highlights the growing interest in crypto as a new asset class, despite acknowledging potential challenges ahead. Recent market fluctuations, influenced by the Fed's rate cut forecasts, have been driven by major tech stocks, with significant gains seen in companies like Amazon and Nvidia.
UBS strategists, led by Andrew Garthwaite, predict a potential S&P 500 surge amid bubble conditions, noting that while the index has risen 23% this year, a loose monetary policy is still absent. They identify six of seven bubble conditions met, with a federal funds rate of around 3.2% needed to trigger a shift of funds into stocks. UBS estimates a 35% chance of a bubble by 2025, suggesting a possible 20% increase in the S&P 500, and recommends investing in reasonably priced AI and electrification stocks like TSMC and Meta to hedge against risks.
UBS strategists, led by Andrew Garthwaite, predict a potential S&P 500 surge amid bubble conditions, noting that while the index has risen 23% this year, it hasn't yet entered a bubble due to restrictive monetary policy. They identify six of seven necessary bubble conditions, with the missing element being a looser monetary stance, suggesting a federal funds rate around 3.2% is needed. UBS estimates a 35% chance of a bubble by 2025, with the S&P 500 possibly surging by at least 20%, recommending investments in reasonably priced AI and electrification stocks like TSMC and Meta to hedge against risks.
UBS analysts warn that a looser monetary policy from the Federal Reserve could trigger a stock market bubble, with six of the seven necessary conditions already in place. They predict a 35% chance of a bubble forming by 2025, contingent on further interest rate cuts. To hedge against this risk, UBS recommends investing in reasonably priced stocks in Gen AI and electrification, including TSMC, Meta, National Grid, PG&E, and Vistra.
Nvidia's stock rose over 3% as analysts from Bernstein, TD Cowen, Morgan Stanley, and Truist maintained bullish ratings despite concerns about competition and potential declines in AI chip demand. Truist raised its price target to $204, citing Nvidia's technological superiority.However, worries persist as major tech companies like Google and Meta develop custom chips that could threaten Nvidia's market share. Analysts acknowledge the challenges but emphasize Nvidia's historical dominance and confidence in ongoing industry innovation.
Investors are concerned that Trump's potential trade tariffs could exacerbate inflation, as retail sales rose 0.7% in November. The Dow Jones is on track for its longest losing streak since the 1970s, while Nvidia faces challenges with thermal issues in its chips, impacting its stock. Tesla continues to rise, with analysts projecting a bullish outlook for 2025.
Wall Street is experiencing a widening divergence between growth and value stocks, with the Nasdaq 100 hitting a record high while the Dow Jones faces its eighth consecutive loss. As the Federal Reserve meeting approaches, market participants are cautious, anticipating a potential 'hawkish cut' that could influence future rate adjustments amid ongoing inflation concerns.Sector performance indicates a strong preference for growth stocks, highlighted by significant gains in tech giants like Alphabet, Tesla, and Broadcom, while the S&P 500 remains in a near-term range. The ratio of value to growth stocks is at its lowest since January 2022, reflecting this trend.
IG
LastPass hackers have stolen $5.36 million from users just days before Christmas, adding to a total of nearly $45 million in crypto thefts since a significant data breach in December 2022. Security experts warn that all private keys and seed phrases stored on LastPass prior to 2023 are at risk, urging users to transfer their assets immediately. As scams surge during the holiday season, caution is advised against festive-looking schemes and free WiFi connections.
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