The Nasdaq Composite Index (.IXIC), which opens a new tab, surpassed 20,000 for the first time on Wednesday, capping a year in which a ferocious rally in technology companies was driven by anticipation of dropping interest rates and enthusiasm over artificial intelligence.
A group of massive technology-focused companies, including Apple (AAPL.O), Nvidia (.NVDA), Google parent Alphabet (GOOGL.O), and, in recent weeks, electric carmaker Tesla (TSLA.O), have opened new tabs, contributing to the tech-heavy index’s more than 33% annual gain. Following a U.S. inflation data that solidified forecasts of a Fed rate drop next week, Wednesday saw advances.
On Wednesday, the index ended the day at 20,034.89, up 1.8%.
Investors who made large investments in growth and technology have profited from the rise, but it has also caused anxiety due to growing valuations and the dominance of megacapfirms, which now make up a larger portion of the index.
Cameron Dawson, chief investment officer of NewEdge Wealth, stated, “There is definitely a part of a chase into year-end, where the winners… keep winning.” “The question is if this momentum can persist into 2025, where stretched valuations, positioning, sentiment, and growth expectations could all present high bars to jump over to keep above-average returns going.”
When the epidemic brought the world economy to a halt in early 2020, the index fell precipitously. However, when the Federal Reserve lowered interest rates to almost zero and the United States launched waves of fiscal stimulus to boost the economy, the index quickly recovered.
As inflation reached 40-year highs and the Fed was had to implement a number of big rate cuts, it suffered a severe decline in 2022, dropping 33%. Higher rates, however, did not trigger the widely anticipated recession, and since then, the index has risen by almost 90%, helped in part by growing enthusiasm for AI’s commercial possibilities.
Since its October 2022 low, Nvidia’s shares have increased by more than 1,100%. The company’s chips are regarded as the industry standard.
