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Nvidia earnings boost: AI chip stocks rally off Q4 report

Shares of Nvidia (NVDA) continue trade higher intraday on Thursday after the company posted its fourth-quarter earnings results on Wednesday, which beat many expectations on Wall Street. In addition to their positive trading, several chip makers in the sector also saw their stock price increase, including Advanced Micro Devices (AMD) and Super Micro Computer, Inc. (SMCI) which is up over 30% ahead of the day's market close.

Yahoo Finance Markets Reporter Josh Schafer discusses the surge in the AI rally coming off of Nvidia's earnings and what it could mean for markets moving forward.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video transcript

- NIDIA shares, they are surging more than 15% heading into the close here. The tech giant's earnings beat, defied, fears that AI enthusiasm has peaked, fueling a wider rally across other names in the AI trade. With more, we're joined now by Yahoo Finance's Josh Schafer. Joshua.

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JOSH SCHAFER: Yeah, Josh. So NVIDIA beats earnings, and then a bunch of companies not named NVIDIA also sort of benefit from that, right? When you take a look broadly across the AI trade that we track here pretty frequently, you're seeing a lot of names up. Some companies we have been watching recently, NVIDIA was revealed they made investments in SoundHound and Arm. Both of those stocks are up today. You see AMD, a fellow chip maker, up over 11% today.

And then I want to hone in on that last one a little bit because this has been a crazy momentum trade in Supermicro computer. We have been tracking that over the past week or so. Guys, the shares really took off over AI enthusiasm. You can see today, up 32%, up over 230% on the year.

And to me, one of the biggest questions coming into NVIDIA earnings was just simply, have we hit peak AI enthusiasm? I think it's not necessarily surprising to a lot of people that have followed NVIDIA earnings over the last couple of quarters that they beat the Street's estimates. They came out with great numbers. They didn't really say anything that shocking.

So it's been interesting to just track the investor enthusiasm, but not only in the AI trade, guys, but when you broaden out in what it means for-- Julian Emanuel over at Evercore called it the FOMO rally. And FOMO doesn't necessarily just mean AI stocks either, which I think is an important thing to highlight. We talked about the broader averages that are hitting record highs right now and even some stocks, like JP Morgan, Waste Management hitting record highs today. I wouldn't really call JP Morgan an AI play, but investors--

- Or Waste Management for that matter.

JOSH SCHAFER: Right, but investors getting excited to essentially get in the market seems to be a little bit of the theme today as well.

- You know, it was really interesting. When those NVIDIA numbers came out last night, initially the stock did pull back a little bit. And I don't think either Josh or I was surprised because there was such enthusiasm. I'm more surprised to see this rally continuing and everything else going along with it. And it is interesting that the FOMO trade idea is coming up again.

We've seen glimmers of it in recent weeks with something like a Supermicro and everybody sort of piling into that. But it feels a little bit like the go-go days of early, even, 2021, when people were stuck at home, they had stimulus checks, and they were looking to get into the market. There is a little bit of that feeling again.

JOSH SCHAFER: There definitely is. And especially, Julie, when you think about the other stocks, like I mentioned, we talk about Supermicro. NVIDIA is the company that reported earnings. And NVIDIA's stock is up about 15%, which is a sizable move in a large company but Supermicro stock is up double that. It's up 30%.

It's just interesting to see where investors are kind of placing their bets at this point in maybe areas where the stock hasn't rallied as much. So NVIDIA is saying the AI story is good to go. Where else can I maybe benefit from that AI trade in other areas? Because maybe NVIDIA isn't necessarily the play because the stock has gone up so much. I was just trying to rationalize, essentially, where investors are placing the bets.

- Well, I think there's also probably some options supercharging that is going on with all of this and that that is also playing a factor in the moves that we're seeing.

JOSH SCHAFER: And the other thing, guys, too that I think is interesting to think about here that you guys talk about a lot is the other news that we're just kind of overlooking over the past week and a half. We have this-- it feels, like Julie said, the go-go days of maybe 2021 or something. And we're not talking about the Fed narrative, that people now think that the rate cuts are coming in June. A week ago that mattered a lot.

- Who cares?

JOSH SCHAFER: The inflation report mattered a lot a week ago.

- What about-- let me ask you this. If you were asked-- if you were thinking about next catalyst for the market, so NVIDIA now rearview mirror, so talking that, so with the next catalyst, what's the next event you would have on your calendar PCE?

JOSH SCHAFER: It's probably the PCE report coming next week. And we're going to probably get back to the market being focused a little bit on the inflation story and what that overall means for the Fed and all of these stocks that are rallying today, when you sit back and think about, what does it matter if interest rates are higher for longer for that specific company or that specific sector? Right now, I think there's a lot of euphoria. And it's great. And it's a one-day thing. But I think when you zoom out, yes, Josh, at some point, the conversation probably does go back a little bit to the macro.

- And just one final point to make on the Fed, the calculation was always if the Fed's going to be cutting, why is it going to be cutting? Is it going to be cutting because things are back to normal and the economy is going well? Or is it going to be cutting because the economy has taken a turn for the worse? It seems to be the first one of those, and that's why they're getting pushed back. And that's why, perhaps, the market seems OK with it.

JOSH SCHAFER: If the economy is doing well, that's a good backdrop for equities.

- It feels that way. All right, thanks, Josh. Appreciate it.