NVIDIA's AI-Fueled Growth Ignites Rally Despite Hawkish Fed Tone
Despite a hawkish tone from Federal Reserve Chair Kevin Warsh at Jackson Hole, Wall Street capped a winning week, with major indices rising between 0.43% and 0.53%. The S&P 500 gained 0.49%, the Nasdaq-100 climbed 0.43%, and the Dow Jones Industrial Average rose 0.53%. This advance came despite a retreat on Friday, which followed Warsh's speech emphasizing inflation risks and hinting that there is room to hike interest rates.
NVIDIA's earnings report was a major driver of this week's rally. The company delivered a double-beat-and-raise after the close on Wednesday, posting enormous growth rates despite supply constraints and zero contribution from China. Its fiscal Q2 2027 revenues almost doubled year-over-year to $96.2 billion, with record operating income and earnings per share.
NVIDIA also guided for FY 2028 revenue growth of approximately 70%, to roughly $673 billion, boosting investor confidence in the AI buildout. This news was further supported by strong reports from CrowdStrike and Salesforce, which both confirmed NVIDIA's signal from the other direction with their own strong results powered by AI demand.
The software sector has performed much better than hardware and infrastructure stocks over the past month, with the contrast becoming striking in the past week. Despite NVIDIA's surge, the iShares Semiconductor ETF gave up about 2.2%, while the iShares Expanded Tech-Software Sector ETF added almost 6%. Microsoft was one of the biggest winners, soaring 6.3% last week and adding more than 31% over the past month as investors began to grasp its omnipresent positioning in enterprise software.