(Credit: Transcript by OpenAI Whisper)
The year of NVIDIA, AI stocks and lofty valuations. The world's most valuable technology firms have powered the NASDAQ 100 index toward its best year in more than a decade, as investor appetite for artificial intelligence overwhelmed concerns about the impact of higher interest rates in 2023. And there was no other company that embodied the excitement about AI and actually delivered on that promise like NVIDIA Corporation its 230% advance has made it the best performer by far in the both the NASDAQ 100 and the S&P 500 index. Below is a look at the year in charts, reflecting analysts' bullish views toward NVIDIA, the NASDAQ 100's gains, the dominance of the seven biggest technology and internet-related stocks, and the tech sector's lofty valuations. NVIDIA Moonshot While there is still plenty of debate about whether NVIDIA's stock is too expensive or cheap, one thing is certain, Wall Street analysts see no end for the unprecedented surge in profits that has fueled the run. The firm is expected to generate about $48 billion in profit over the next 12 months, up from expectations of about $10 billion at the start of the year. NASDAQ Powers Through High Rates A steady climb in interest rates for most of the year proved to not be the threat to the sector that many thought it would be. Instead, the NASDAQ 100 continued to rise despite the yield on the 10-year U.S. Treasury yield staying above 4% for most of the year. The strength was fueled by rising profits after companies slashed tens of thousands of jobs and reigned in spending. Technology stocks have lifted off recently on signs the Federal Reserve is done with its historic policy-tightening campaign. Bigger Than Ever The seven biggest technology and internet-related stocks — Apple Inc., Microsoft Corporation, Alphabet Inc., Amazon.com Inc., NVIDIA, Meta Platforms Inc. and Tesla Inc. — saw their combined weighting in the S&P 500 rise to a record 29% in November. Investors flocked to them in part on bets that they are best positioned to capitalize on artificial intelligence due to their vast scale and financial strength. The cohort accounts for about two-thirds of the benchmark's 23% gain in 2023. Stretched Valuations Those bigger profits have brought valuations down from nosebleed levels but they're still lofty. The NASDAQ 100 is priced at about 25 times profits projected over the next 12 months, according to data compiled by Bloomberg. While that's down from a peak of 30 in 2020, it's well above the average of 19 times over the past two decades. Top Tech Stories Intel Corporation, the biggest maker of personal computer processors, announced new chips for PCs and data centers that the company hopes will give it a bigger slice of the booming market for artificial intelligence hardware.
Summary:
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Strong Year for Tech Stocks and AI: The NASDAQ 100 index experienced its best year in over a decade, driven by high investor interest in artificial intelligence (AI) stocks. This surge in interest overshadowed concerns about rising interest rates in 2023.
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NVIDIA's Remarkable Performance: NVIDIA Corporation stood out as the epitome of AI success, with a 230% increase in its stock price, making it the top performer in both the NASDAQ 100 and the S&P 500 index.
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Analysts' Optimism About NVIDIA: Despite debates over NVIDIA's stock valuation, Wall Street analysts predict continued profit growth, expecting about $48 billion in profit over the next 12 months, a significant increase from the $10 billion expected at the year's start.
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Resilience of NASDAQ Amidst Rising Rates: The NASDAQ 100 rose despite high interest rates, fueled by increased profits from companies cutting jobs and reducing expenses. Signs that the Federal Reserve may end its policy-tightening campaign also boosted technology stocks.
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Dominance of Major Tech Companies: The seven largest technology and internet-related stocks (Apple, Microsoft, Alphabet, Amazon, NVIDIA, Meta Platforms, and Tesla) increased their combined weighting in the S&P 500 to a record 29% in November, accounting for about two-thirds of the index's 23% gain in 2023. This growth is partly attributed to these companies being well-positioned to capitalize on AI.
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Valuations Still High: Despite a decrease from their peak, tech stock valuations remain high, with the NASDAQ 100 priced at about 25 times projected profits, above the two-decade average of 19 times.
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Intel's Move into AI Hardware: Intel Corporation, a leading maker of personal computer processors, announced new chips for PCs and data centers, aiming to expand its share in the AI hardware market.