Following a period of instability, the stock market returned to the trend of investing in artificial intelligence (AI) at the beginning of 2024 this week. The focus shifted from concerns about future demand during the earnings season. AI , however, investors are currently engaging in speculation regarding what Nvidia ‘s ( NVDA 1.40% ) how much money will be received.
During the current week, Nvidia’s shares surged by 18.8%. Micro Supercomputer ( SMCI 0.34% ) increased by 22.1%. Sea Ltd ( SE -0.59% ) Increased by 23.3% by 3 p.m. ET on Friday.
Recovering from an AI break.
Nvidia, Super Micro Computer, and the overall AI market have experienced a slowdown in recent weeks as investors question whether the demand for products in this industry can sustain its current rate of growth.
Large technology companies have pledged to spend tens of billions of dollars with minimal returns, although they have the financial resources to do so. Will smaller companies and new ventures follow suit and invest in artificial intelligence?
There is no definitive conclusion yet, as it will probably take years to unfold, but there are signs that high-growth technology companies are still investing heavily in artificial intelligence. This could positively impact Nvidia’s financial results and projections for the upcoming month, which in turn will benefit Super Micro Computer’s business.
Sea Ltd is now entering the realm of artificial intelligence.
The investment in AI by large tech companies is well-known, but the question remains whether smaller companies and applications will also benefit financially from this technology. The latest updates and announcements from Sea Ltd suggest that they will indeed be able to do so.
The company reported a significant increase of 23% in revenue to $3.8 billion, with a decrease in net income from $331 million last year to $79.9 million. However, the most important information was hidden within the earnings announcement.
Starting from this week, Dr. Silvio Savarese will become a member of Sea’s board of directors. Savarese currently holds the position of chief scientist. Salesforce Research is the department where the company’s AI projects are located. Additionally, he holds a position as a professor at Stanford University and has been involved in AI research for a long time.
During the earnings call, Sea’s founder and CEO Forrest Li emphasized his strong dedication to developing suitable AI tools for Sea’s operations. He highlighted the significant potential of AI in areas such as e-commerce and gaming. Embracing AI could pave the way for sustained rapid growth in Sea’s business in the foreseeable future.
The big picture
The positive performance of the overall market for the week was influenced by the decrease in inflation, as shown by the 2.2% increase in the manufacturing price index compared to a year ago, and the minimal 2.9% rise in the Consumer Price Index year over year. This decline in the inflation rate could potentially allow the Federal Reserve to reduce interest rates if desired. Additionally, the decrease in consumer spending suggests that some additional economic stimulus may be necessary to sustain the market’s upward momentum.
Despite the market closely following updates on inflation, interest rates, and AI investments, the truth is that consumer spending has not returned to pre-stimulus levels. Additionally, AI has yet to establish a sustainable business model. The market’s current optimism about the economy and AI might not accurately reflect the actual situation. While this week may have been positive, market sentiment could shift in the coming week.
