AI = Artificial Intelligence or “All In”?

On the back of a positive quarterly announcement last Thursday from Taiwan Semiconductor about the strength in “AI-Artificial Intelligence” chip demand turning the rest of semiconductor demand up, tech stocks, and more specifically, names like NVDA and AMD exploded higher Thursday and Friday pushing the S&P 500 to a closing all-time high.  This marks the S&P 500 hitting a record high for the first time in two years.  Friday’s move was quite reminiscent of option expiration Friday on January 21st, 2000, as the Dot.com rally took a breathershort term.

The S&P 500 index rose +1.2% last week, led by a strong +4.3% rally in technology, while energy, materials and utilities lagged. The Nasdaq added +2.3% on the week and has now rallying close to +20% over the last three months.  The index ended last week at 4840, surpassing its prior record reached two years ago at 4,819. Its previous record close, also reached in January 2022, was 4,797.  The prior week it closed at 4,784. Most of the move up came in the last day and a half of the week into option expiration.

On the downside, Chinese stocks continue to wilt on the back of too much debt, low government stimulus, and ongoing investor concerns of communist and command economies.

Taiwan Semiconductor (TSM) said it expects full-year revenue growth in the low-to-mid-20% range. The outlook is considered a key indicator of chip industry health as the company’s chips are used in Apple iPhones as well as Qualcomm mobile chipsets and Advanced Micro Devices’ processors, among others.

Amid the bullish chip industry signal, the technology sector led the week’s climb with a +4.3% increase, followed by a +1.9% rise in communication services. Financials, consumer discretionary and industrials also gained on the week.

The technology sector’s gainers included chip industry companies Advanced Micro Devices, up +19%, Western Digital (WDC), up +9.5%, and Applied Materials (AMAT), up +11%.

In communication services, shares of Walt Disney (DIS) rose +3.0% as the entertainment company’s board rejected the nominations by activist shareholders Trian Fund Management and the Blackwells Group, and endorsed 12 nominees for directors.

On the downside, utilities fell -3.7%, followed by a -3.1% drop in energy and a -2.1% decline in real estate. Other sectors that fell included materials, consumer staples and health care.

Earnings season explodes this week as hundreds of companies report including United Airlines Holdings (UAL), Johnson & Johnson (JNJ), Procter & Gamble (PG), Netflix (NFLX), Tesla (TSLA), Abbott Laboratories (ABT), International Business Machines (IBM), Verizon Communications (VZ), AT&T (T), Visa (V), Intel (INTC), Union Pacific (UNP), American Express (AXP) and Colgate-Palmolive (CL).

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CHART: WEEK ENDING 1/19/2024 
(CUMULATIVE TOTAL RETURNS)