Stock market rally continues as Nvidia and AMD lead chip sector

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The stock market rally extended its gains last week, boosted by the strong earnings and outlook of Nvidia (NVDA), the leader in artificial intelligence and gaming chips. The Dow Jones and the S&P 500 hit new highs, while the Nasdaq approached its record level. Nvidia soared to a new milestone, while its rival AMD (AMD) was setting up for a possible breakout.

Nvidia reported a 50% jump in revenue and a 77% surge in earnings per share for its fourth quarter, beating analysts’ expectations. The company also guided higher for the current quarter, citing strong demand for its chips across various segments, such as gaming, data center, automotive, and cryptocurrency mining. Nvidia also announced a 4-for-1 stock split, pending shareholder approval.

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Nvidia’s stellar results lifted the entire chip sector, which has been outperforming the broader market. AMD, which competes with Nvidia in the gaming and data center markets, rose to a two-month high and was forming a cup-with-handle base with a buy point of 122.49. AMD is expected to report its first-quarter earnings on April 27.

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Other chip stocks that were setting up or breaking out included Lennar (LEN), Manhattan Associates (MANH), Microsoft (MSFT), and MongoDB (MDB). Microsoft and MongoDB are also involved in artificial intelligence, while Lennar is a homebuilder and Manhattan Associates is a software provider.

Investors should also be cautious about new buys, especially with the chip sector, which is known for its volatility and cyclical nature. The chip sector could face some headwinds, such as supply chain disruptions, rising competition, and regulatory scrutiny.

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The market rally will also face some challenges in the coming weeks, such as the earnings season, the Federal Reserve meeting, and the inflation data. Investors should monitor the market’s reaction to these events and adjust their exposure accordingly

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Source : IBD DIGITAL

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