On May 22th local time, the leading artificial intelligence (AI) company, NVIDIA, announced its latest financial report, which exceeded market consensus expectations, with net profits reaching 14.88 billion U.S. dollars, a year-on-year increase of 628%. The after-hours trading price surged by more than 6%, breaking through the 1,000 U.S. dollar mark.

Despite the U.S. stock market closing lower that day due to the hawkish Federal Reserve meeting minutes, the U.S. stock cross-border ETFs listed in China's domestic market rose significantly, setting a historical high. NVIDIA's strong performance boosted sentiment, with the ETF premium rate exceeding 2%. As of the close on May 23th, the domestic Shanghai-based U.S. stock 50 ETF (513850) rose by 1.33% to 1.217, and the NASDAQ ETF (513300) rose by 1.21% to 1.752.

Wall Street once again raised its target price for NVIDIA, with 1,000 U.S. dollars no longer being a questioned astronomical figure. Goldman Sachs gave the latest 12-month target price of 1,100 U.S. dollars (previously 875 U.S. dollars three months ago), and institutions have raised their EPS (Earnings Per Share) forecasts for the fiscal years 2025 to 2027, with an average increase of 8%.

The impact of heavyweight stocks on the overall index is profound. Matt Weller, Global Head of Research at Gain Capital Group, told reporters that NVIDIA accounts for about 4% of the NASDAQ 100 index. "Undoubtedly, this trend remains bullish. Since the NASDAQ index broke through the 18,400 resistance level last week, setting a historical high, the index has held onto this key point and continued to rise. As long as NVIDIA's earnings and prospects are not far below expectations, traders will consider any drop to the median range of 18,000 to 19,000 as a potential buying opportunity."

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NVIDIA ignites cross-border ETF investment sentiment.

At the close on May 23th, NVIDIA's stock price was reported at 949.5 U.S. dollars, down 0.46%, but after the financial report was announced, the after-hours price surged by 6.68%, with each share reported at 1,012.89 U.S. dollars.

NVIDIA's sales and profits both exceeded Wall Street expectations. NVIDIA estimates that current fiscal quarter sales will be about 28 billion U.S. dollars, but only double year-on-year, because after the AI boom started, the comparative base of NVIDIA's quarterly performance has been raised; the company announced that the latest fiscal quarter's revenue increased to 26 billion U.S. dollars, setting a historical high; net profit rose from 2 billion U.S. dollars in the same period of the previous year to 14.88 billion U.S. dollars.

NVIDIA CEO Jensen Huang said that a new industrial revolution has begun, AI will bring significant productivity improvements to almost all industries, and help businesses improve cost and energy efficiency. He stated that the demand for NVIDIA's existing AI chips and the next-generation products expected to be launched later this year remains strong.

Currently, investors are eagerly awaiting news of the company's Blackwell Graphics Processing Unit (GPU). This new chip is scheduled to be released in the second half of this year and has already accumulated orders from tech giants such as Microsoft and Amazon.

Over the past 12 months, NVIDIA's stock price has more than doubled, with a market value breaking through 2 trillion U.S. dollars. The company said on Wednesday that it will carry out a 1-for-10 stock split, effective on June 7th, and also increase the dividend from 4 cents to 10 cents. Institutions expect that this may further drive market sentiment.Due to the hawkish Federal Reserve minutes released in the early hours of Thursday, the US dollar rebounded, leading to a general retreat in commodities and US stocks. However, trading of US stock ETFs in the Chinese market was active and set a new historical high, with NVIDIA's popularity being indispensable.

Lei Zhiyong, Deputy Director of Equity Investment at Morgan Stanley Fund, told reporters that since October 2022, the AI leader NVIDIA has experienced four better-than-expected financial reports, and this time it has once again exceeded the market consensus expectations for the fifth time. At this point, the market is very concerned about the sustainability of the company's or the entire AI industry's growth. Huang Renjun said in a conference call that the next industrial revolution has already begun and reiterated that artificial intelligence will bring obvious productivity growth to "almost every industry."

NVIDIA's business segments mainly include the following areas: gaming platforms, data centers, artificial intelligence, autonomous driving cars, and professional visualization. The data center is the leader. The reason why many Wall Street institutions have recently raised their target prices is due to the continued strong demand for AI servers and supply improvements. Especially now, NVIDIA is trading at a price-to-earnings ratio of 35 times, which is only 36% of the premium covered by Goldman Sachs, while the median premium for the past three years is 160%.

A private equity investment manager told reporters that recently, NVIDIA's major customers (mainly members of the "technology seven giants") have given a positive outlook on capital expenditures related to generative AI, and NVIDIA's GPUs are in short supply.

For example, Alphabet stated that the company has made good progress in generative AI-related services and said that due to investments in technical infrastructure, capital expenditures in the remaining quarters of 2024 may be higher than the first quarter (about $12 billion); Microsoft emphasized that AI contributed 7 percentage points to Azure's growth in March, higher than 6 percentage points in December and 3 percentage points in September. Currently, the demand for Azure's AI is higher than its existing capacity. In terms of capital expenditures, Microsoft said that there will be a substantial sequential increase in the June quarter and stated that the capital expenditures for the fiscal year 2025 will increase year-on-year, and the company hopes to meet the growing demand for cloud and artificial intelligence products.

However, some institutions that have invested in NVIDIA are cautiously optimistic. A QDII investment manager previously mentioned to reporters that from a medium to long-term perspective, NVIDIA's data center GPU business faces two challenges: on the one hand, the competitive landscape of general-purpose GPUs has deteriorated, with AMD and Intel entering the market, and it may not be able to maintain such high prices and profit margins; on the other hand, each CSP (cloud service platform, such as Amazon's AWS, etc.) has a huge motivation and ability to develop its own dedicated AI acceleration chips. Although it is still difficult to provide general computing services to the outside world in the foreseeable future, it is a fact that it is happening as a replacement for a portion of the existing NVIDIA chips used internally.

Institutions still see an increase in the Nasdaq index.

As of Tuesday this week, the Nasdaq 100 index has closed slightly higher for two consecutive days, setting the second historical high since the beginning of the week. Although US stocks and cross-border ETFs within the territory do not have an absolute fitting correlation, the future overall direction of the US stock index will also lead the direction of these ETFs.

"Since the beginning of March, NVIDIA has been limited by the resistance level of $960. In the current situation, it is very likely to break through $1,000 and then rise to $1,100," Wheeler said.

In terms of the Nasdaq 100 index, NVIDIA accounts for about 4% of the index's weight. Since breaking through the resistance level of 18,400 last week and setting a historical high, the index has been holding this key point and continues to rise. Many traders believe that 19,000 will be the next target.Overall, the market will continue to be influenced by macroeconomic data and changes in Federal Reserve policy. Federal Reserve Chairman Powell has made numerous statements in the past suggesting that the next significant move in monetary policy is more likely to be a rate cut. However, the Federal Reserve's May interest rate decision overnight presented a different view, with several officials expressing a willingness to tighten policy further if necessary, and all officials expressing disappointment with the first quarter's inflation data.

Nevertheless, most institutions still believe that U.S. inflation will trend downward subsequently, and the current market bet on a rate cut in September is about 50%. An economist from an international investment bank told reporters that for some time, a characteristic of U.S. economic data has been the weakness in parts of the economy that are sensitive to the cycle and interest rates (such as production, trade, and some investments), while consumption remains strong. Therefore, the current economic situation is indeed rare, with the U.S. maintaining an economic growth of around 3%, while the recession probability model remains at a very high level.

However, the strong part of the economy (consumption) is now slowing down, while the weak part (production/investment) is beginning to improve gradually. Since consumption accounts for a larger share of the economy, economic growth may slow down in the next few quarters, but this is a slowdown from a very high level. The question now is how fast the slowdown in consumption will be relative to the recovery in investment/production. The key variable to answer this question is inflation, which will determine the time and intensity of the Federal Reserve's continued tightening.

UBS believes that the "stickiness" of U.S. inflation is very short-lived and is concentrated in only about two indicators (rent and travel). By the fall, the Federal Reserve should be able to see enough evidence of economic slowdown and improvement in inflation to support a rate cut. However, risks include: the economy not slowing down; core inflation remaining closer to 3% rather than 2%; and the unemployment rate starting to decline again. This scenario could sound the alarm, potentially leading the Federal Reserve to restart interest rate hikes at some point in 2025.