Nasdaq 100 Rises 0.9% as AI Drives Growth

We expect the Nasdaq 100 (NDX) to close up 0.9% tomorrow, with the S&P 500 (SPX) gaining 0.6%, as the market continues to reward companies driving the AI revolution. The underlying thesis is robust: enterprise capital expenditure on AI infrastructure remains a key theme, translating directly into strong performance for chipmakers and cloud providers. This sustained investment, evident in ongoing demand for specialized hardware and software, will maintain the market's bullish tilt, particularly for large-cap technology stocks.

Nvidia (NVDA) is a central player in this dynamic. The company continues to see strong order backlogs for its cutting-edge AI graphics processing units (GPUs). Major cloud service providers like Microsoft (MSFT) and Amazon (AMZN) are aggressively deploying these chips to build out their AI capabilities, creating a virtuous cycle of demand. We anticipate Nvidia (NVDA) will see renewed buying interest, adding at least 1.8% to its share price. This move reflects not just current sales but also the market's expectation for further revenue growth as AI deployments expand across industries. This consistent demand for AI hardware directly translates to increased revenue for those supplying the core components.

Beyond hardware, the broader semiconductor supply chain is benefiting. ASML Holding (ASML), the sole producer of extreme ultraviolet (EUV) lithography machines, is critical for manufacturing the most advanced chips. We expect ASML Holding (ASML) to gain at least 1.5% as chipmakers continue to invest heavily in next-generation fabrication capabilities. Similarly, Taiwan Semiconductor Manufacturing (TSM), the world's largest contract chip manufacturer, will likely see gains of 0.7%, driven by strong orders from its AI and high-performance computing clients. These companies are foundational to the AI build-out, and their performance indicates the health and acceleration of this technological shift.

Consumer discretionary spending will see mixed signals. While Carnival (CCL) is expected to show continued strength in its earnings report, reflecting robust demand for travel and experiences, Nike (NKE) faces a tougher outlook. Nike's (NKE) pre-market earnings report could highlight weaker sales forecasts and inventory pressures, potentially leading to a share price decline of 3.5%. This divergence in consumer-facing companies suggests a nuanced spending environment where experiences outperform goods, but overall, the capital flowing into AI tech will outweigh these sector-specific headwinds.

What would change our mind? A significant negative revision to AI capital expenditure guidance from a major cloud provider or a clear signal from Federal Reserve officials that interest rates will be higher for longer than currently expected could dampen enthusiasm. Specifically, any reports of order cancellations for high-end AI chips would immediately challenge our bullish view on the technology sector. Unexpectedly weak retail sales data, beyond what Nike (NKE) might indicate, could also broaden concerns about consumer resilience.