Interest Rates, AI Woodstock Will Rule Markets This Week
As this earnings season comes to a close, investors will be focused on two key events this week: NVIDIA’s long-awaited GPU technology conference and the Federal Reserve’s Open Market Committee (FOMC) meeting.
Both events have the potential to move markets. Let’s take a look at why it’s so important.
AI Woodstock
NVIDIA’s GPU Technology Conference, commonly known as GTC, is scheduled to be held March 18-21 at the San Jose Convention Center. The event, which some are calling “AI Woodstock,” is scheduled to kick off Monday at 1 PM PT with a keynote address from NVIDIA (NASDAQ:NVDA) founder and CEO Jensen Huang.
This year’s event is particularly meaningful in two ways. First, due to COVID-19, live, face-to-face events have not been held since 2019. Second, artificial intelligence has since pretty much taken over the world, or at least the market.
NVIDIA is a prime example of AI, as its leadership in manufacturing chips that support more complex AI tasks has generated massive profits over the past five years.
Consider this fact: In 2019, when the last offline GTC was held, NVIDIA’s market capitalization was approximately $109 billion, making it the 81st largest company in the world by market capitalization. Five years later, NVIDIA is the third-largest company in the world, with a market capitalization of $2.1 trillion.
So obviously a lot has changed.
“Generative AI has moved center stage as governments, industries, and organizations seek to leverage its innovative capabilities,” Huang said. “GTC has become the most important AI conference in the world because the entire ecosystem exists to share knowledge and advance cutting-edge technologies.”
As previously mentioned, Huang is scheduled to deliver the keynote address on Monday in a speech titled “AI’s Transformational Moment.” He will introduce the next-generation AI chip, B100, and talk about the rapid growth of Gen AI and future prospects. He will be joined by experts from OpenAI, Microsoft, Google, Meta Platforms, SAP Labs, Boston Dynamics, and more to speak throughout the conference. About 16,000 people are expected to attend, four times more than in 2019.
Wall Street analysts expect the focus and interest in NVIDIA and AI to boost its stock price, which is already up 87% this year to $901 per share. Ahead of the meeting, several analysts, including Bank of America, raised their price targets from $925 to $1,100 per share. Truist raised its target from $911 to $1,117, while HSBC increased its target from $880 to $1,050.
But the impact of this event could certainly go beyond NVIDIA stock. Because as technology transcends semiconductors, it has the potential to move others in the AI space and beyond.
What will the Fed do?
Another big event this week is the Federal Reserve’s FOMC meeting on Tuesday and Wednesday. As is traditional, the Federal Reserve is expected to make a decision on interest rates at the end of its meeting Wednesday afternoon.
Most analysts believe the Fed will keep the federal funds rate in the 5.25% to 5.5% range beyond July 2023. But Fed officials say interest rates have peaked this year and are likely to fall as inflation approaches its 2% target range without having a significant impact on employment or the economy. In other words, the ‘soft landing’ that Federal Reserve officials are aiming for is becoming visible.
Interest rates are likely to remain unchanged as the Fed will want to see another month of progress toward its goal. Even if the federal funds rate remains unchanged, investors will be listening closely for more clues about when interest rates may start to fall.
Markets tend to overreact to comments from the Fed, so if this week’s comments appear to be positive, it will be a catalyst for most stocks. On the other hand, statements or commentary that are considered unoptimistic can temporarily send a stock down.
Overall, this will be a very interesting week for the stock market.
