The Nasdaq Composite jumped 1.6%: Nvidia sparked a tech rally

Major U.S. stock indices closed higher on August 27 thanks to a rally in AI stocks: Nvidia’s quarterly earnings report and its outlook for next year were strong enough to restore investor optimism regarding chipmakers and AI-related companies in general, according to MarketWatch. The market breathed a sigh of relief, Business Insider notes.

The tech-heavy Nasdaq Composite surged the most—by 1.6%—right off the bat. The broad-market S&P 500 Index, in which Big Tech companies also have significant weight, rose 0.7%. Notably, the technology sector was the only one of the 11 S&P 500 sectors to end the trading session in positive territory. The Dow Jones Industrial Average, a "blue-chip" index, gained 0.2%—largely thanks to a 22% surge in Salesforce’s stock price, also following its quarterly earnings report.

Nvidia's stock rose 8.7%. This marks the first time in over a year that the stock has gained ground in the trading session following the release of its earnings report. As a result, the company’s market capitalization increased by $442 billion in a single day, according to Bloomberg . This surge is second only to the increase in Microsoft’s market value a month ago following a strong earnings report.

On August 27, shares of other chipmakers, including Broadcom and Intel, also rose, climbing more than 4%. American depositary receipts (ADRs) of contract chipmaker TSMC gained about 2.3%. The iShares Semiconductor ETF, which serves as an indicator of chipmakers’ stock performance, jumped by about 2%.

Shares of memory manufacturers have risen: as Nvidia’s management reported during a conference call with investors, the only factor currently limiting the company’s future shipment volumes is its ability to secure high-speed memory. Shares of one of the market leaders, South Korea’s SK Hynix, rose 2.3%.

The market value of the cloud-free provider Nebius increased by 2%.

Nvidia's results are "positive for the entire ecosystem of AI chip and networking equipment manufacturers," according to BNP Paribas analyst Carl Ackerman, as quoted by MarketWatch.

“This report says more about capital expenditures than it does about Nvidia,” said Nick Frasse, a thematic ETF manager at VanEck, as quoted by Business Insider. “This is the clearest signal yet as to whether investment in AI infrastructure will accelerate in 2027, and this will affect not only computing power but also memory, chip manufacturing, packaging, and energy.”

“There’s been a lot of discussion lately about the closed-loop financing of hyperscalers and whether their revenues can actually cover the enormous expenses they incur. Perhaps this discussion will die down for a while now,” Melissa Brown, managing director of investment solutions research at SimCorp, told CNBC. According to her, other companies betting on AI are “simply riding on Nvidia’s coattails.”

The topic of artificial intelligence has proven to be “incredibly powerful,” a trend that was particularly evident in companies’ second-quarter earnings reports, noted Sarah Hirsch, global market strategist at New York Life Investment Management, in an interview with MarketWatch. According to her, AI will likely continue to support corporate earnings growth.

"The most important takeaway" from Nvidia's earnings report is that demand for artificial intelligence hardware continues to accelerate, according to Forrester analyst Navin Chhabra. However, he warned that new challenges are simultaneously emerging in the market. The company’s customers are facing supply shortages and, at the same time, growing pressure to demonstrate a return on their AI investments. “The AI infrastructure market is entering a new phase where players need to focus less on acquiring GPUs and more on deriving measurable business returns from their AI investments,” the analyst added.

This article was AI-translated and verified by a human editor