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HomeTechNvidia's AI-Driven Surge Propels S&P 500 Towards New Highs: Here's What's Next

Nvidia’s AI-Driven Surge Propels S&P 500 Towards New Highs: Here’s What’s Next

Nvidia, a prominent player in the world of artificial intelligence (AI), has sparked a tremendous rally this week that not only boosted its own stocks but also helped the broader stock market sail past a pivotal resistance level. This move hints at promising prospects ahead, shares Katie Stockton, founder of Fairlead Strategies, in a recent analytical note.

Just last week, Stockton underscored that the S&P 500 had managed to surpass a significant resistance level at 4,155. She believed that if the index could maintain its stand above this point by the end of the trading week, it would signal a bullish breakout.

Throughout the week, stocks seemed to struggle, even slipping back below the critical resistance level, largely due to the hovering cloud of uncertainty tied to the impending debt-ceiling deadline. However, thanks to Nvidia, the winds of fortune changed direction on Thursday.

Nvidia’s stock skyrocketed by as much as 30% on Thursday, triggered by its staggering earnings guidance. This showed that the buzz around generative artificial intelligence was not mere hype—it was translating into substantial revenue growth. This shot of adrenaline to Nvidia’s shares also invigorated the broader tech sector.

“Yesterday’s rebound gives the S&P 500 a better chance of confirming last week’s breakout above cloud-based resistance [of] 4,155,” Stockton observed.

Now, the S&P 500 is cruising comfortably above its key resistance level of 4,155. As of Friday afternoon, the index was edging just below 4,200, almost affirming the occurrence of a bullish breakout.

According to Stockton, this breakout heralds potential upside momentum for the broader stock market. She points to 4,310 and 4,510 on the S&P 500 as key resistance levels to keep an eye on. Ascending to these levels implies a potential upside of 3% and 8%, respectively.

“A decisive breakout would be a bullish development with a duration of three to four months,” said Stockton. “A compelling upside objective of ~4,510 could be derived from a subsequent breakout above February’s high based on a measured move projection.”

In addition to these insights, Stockton drew attention to the positive trajectory in semiconductor stocks on Thursday, thanks largely to Nvidia’s meteoric rally. She believes this momentum should continue, lending bullish implications for the sector as a whole—even if Nvidia’s stock takes a breather after its recent rally.

With initial resistance pegged at around $142 and then around $159, the semiconductor index “has room to intermediate-term overbought territory,” suggests Stockton, signaling a potential upside of as much as 10% from the current levels.