Tech-Led Rally Stumbles as Nvidia’s AI Momentum Fades

Dow Jones Stock Markets INDEXDJX:DJI

On Friday, the stock market mostly hovered around the flatline as the tech-led rally, which had been going strong for over a week, started to show signs of fatigue.

The benchmark S&P 500 (^GSPC) dipped slightly by about 0.1%, while the tech-heavy Nasdaq Composite (^IXIC) fell by 0.2%. In contrast, the Dow Jones Industrial Average (^DJI) managed a slight gain of nearly 0.2%.

Thursday’s dip in the S&P 500 and Nasdaq was significant because it broke a positive trend that had been evident in recent weeks. The S&P had been on a surge, briefly crossing the 5,500 mark for the first time on Thursday. However, the Nasdaq’s seven-day streak of record closes came to an end with its loss in the previous session.

The recent rally, driven by enthusiasm for artificial intelligence (AI) and spearheaded by Nvidia (NASDAQ:NVDA), exhibited signs of slowing down. Nvidia, which briefly claimed the title of the world’s most valuable company this week, experienced a notable loss on Thursday and was down more than 2% in Friday morning trading. Other chip stocks, including Broadcom (NASDAQ:AVGO), Super Micro Computer (NASDAQ:SMCI), and Qualcomm (NASDAQ:QCOM), also faced declines alongside Nvidia in early trading.

Investors are also carefully analyzing the overall health of the US economy and the potential future direction of interest rates. Former St. Louis Fed president James Bullard, known for his stance on inflation, stated on Thursday that last week’s lower Consumer Price Index reading could lead to a rate cut in September. The CME FedWatch tool suggests that roughly two-thirds of traders anticipate rate cuts to begin in September.

On the macroeconomic front, an initial reading on US economic activity from S&P Global is expected to be released Friday morning.