Optimism is at giddy proportions that revolutionary technology and optimism that the Federal Reserve will continue to lower interest rates is boosting the S & P with gargantuan short-term gains in the largest technology companies. The gains in NVDA are incomprehensible.
It took 24 years, 4 months and 8 days for NVDA to be worth $1 trillion. The market cap jumped from $3 trillion to $4 trillion in 41 trading days (May 13, 2025 to July 9, 2025) and crossed $5 trillion on October 29.
In less than six months, NVDA added $2 trillion in value, an amount that is worth more than all members of the S & P 500 for the exception AAPL, MSFT, GOOG and AMZN. NVDA’s $2 trillion gain is more than the GDP of Russia and Canada.
Wow! Talk about discounting the future! It is often written that the most obvious conclusions are those that are ignored. A case can be made that there is an “either/or” situation unfolding. There will be either a humongous economic technology boom that will massively increase productivity, or some parts of the markets are completely irrational, setting many up for great failure.
The reality is probably somewhere in between.
Speaking of uncertainty, three Federal Reserve officials stated that they di not support the FOMC’s decision to cut interest rates last week citing that inflation remains too high. They are non-voting members.
The remarks are perhaps the first salvo in what is likely to be an intense debate over the next six weeks before the central bank’s next policy meeting in December.
Part of the debate among officials involves differing assessments of the so-called neutral rate, the theoretical level of interest ratees which would neither stimulate nor restrain economic growth. September’s FOMC meeting indicated the Committee thought the neutral rate ranged from 2.75% to 4.0%.
The acceptance of neutral rate is instrumental to the market’s determination of long-term interest rates.
Hypothetically a higher neutral rate dictates lower equity valuations if everything else remains the same. Moreover, higher neutral rates also dictate higher long-term interest rates.
Perhaps an appropriate statement to make is that 3% in the new speed limit versus 2.0%.
For what it is worth department and falls under the category it is not what one says but rather why one says it. The WSJ reported that MSFT founder Bill Gates is walking back his view on climate change stating that his former “doomsday view” is wrong.
Can it remotely be suggested it is because of AI and MSFT’s role in this new technology? As written last week, the International Energy Agency (IEA) is estimating that global data center electricity consumption could double by 2030 and its base case sicario is that demand is projected to rise by 150%.
Over the next several years, MSFT is planning to spend hundreds of billions on AI infrastructure that will greatly impact its earnings and stock price. What will be the energy source for this huge potential surge in electricity to power AI? Renewables are not reliable given the technology, transmission lines and storage capacity are presently not available.
What will happen this week?
Last night the foreign markets were up. London was up 0.01%, Paris down 0.03% and Frankfurt up 0.84%. China was up 0.55%, Japan up 2.12% and Hang Seng up 0.97%.
Dow and NASDAQ are flat and up 0.50% as NVDA has climbed another 2% as they have been cleared to sell chips to the UAE. The 10-year is off 12/32 to yield 4.11%.
