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US Stocks Surge to Record Highs Amid Powell Testimony and Rate Cut Speculation

US stocks surged on Thursday, propelled by the S&P 500 (^GSPC) reaching an unprecedented peak, maintaining an optimistic stance amidst the second day of Federal Reserve Chair Jerome Powell’s closely monitored testimony and in anticipation of Friday’s unveiling of the February jobs report.

Once again, technology stocks led the charge, with the Nasdaq Composite (^IXIC) surging by as much as 1.5%. Meanwhile, the S&P 500 soared by just over 1%, culminating in a record closing high of 5,157.34. The Dow Jones Industrial Average (^DJI) saw a more modest uptick of around 0.3%.

Over the past two trading sessions, stocks have been on the rise as investors evaluated Powell’s responses to lawmakers’ inquiries regarding the economy and monetary policy. Powell’s testimony did not yield any adverse developments or surprises. He steadfastly reiterated the Federal Reserve’s stance of not rushing to implement policy adjustments, although he hinted at potential rate cuts later in the year.

During Thursday’s session before the Senate Banking Committee, Powell reaffirmed the central bank’s position on potential rate cuts, contingent upon ongoing moderation in inflation data.

On the economic front, jobless claims released on Thursday remained unchanged at 217,000 for the week ending March 2nd. Continuing claims showed a slight uptick of approximately 8,000 from the previous reading, reaching just above 1.9 million. The eagerly anticipated non-farm payroll report is slated for release on Friday morning.

Meanwhile, gold (GC=F) extended its winning streak for the fifth consecutive day, breaching a fresh high above $2,160, as the possibility of a rate cut provided renewed momentum to the ongoing record-breaking surge.

In corporate news, shares of Victoria’s Secret (VSCO) plummeted by nearly 30% after the lingerie retailer’s sales guidance failed to meet expectations.

AI Chip Revenue Projections Send Broadcom Stock on Rollercoaster Ride

Broadcom projected a robust $10 billion in revenue from AI-related chips this year, yet its stock stumbled as the company’s full-year outlook didn’t excite investors. Marvell Technology, a smaller competitor, also disappointed with a revenue forecast below market expectations, leading to a more than 6% drop in its stock during extended trading.

Investors are closely monitoring both companies, anticipating their shares of the burgeoning AI technology market, including breakthroughs like OpenAI’s ChatGPT and Google’s Gemini.

Broadcom and Marvell specialize in networking chips crucial for handling the massive data requirements of AI computing, as well as assisting clients in designing custom AI chips. During an earnings call, Broadcom CEO Hock Tan revealed that a significant portion of the firm’s projected $7 billion in AI chip revenue for 2024 would stem from aiding two undisclosed major clients in custom chip design, widely believed to be Google and Meta Platforms.

Tan emphasized that the custom chip business could yield margins akin to the company’s corporate gross margin, standing at approximately 75% on an adjusted basis for the fiscal first quarter. Recent reports indicate Nvidia is eyeing competition with Broadcom in the custom AI chip market.

Despite Broadcom’s optimistic revenue forecast, the company didn’t update its annual revenue projection of $50 billion, disappointing some investors. The stock, which had surged by 26% in 2024 on AI enthusiasm, dipped over 1% in after-hours trading following the stagnant forecast.

Analysts note that companies less directly tied to the AI boom may experience fluctuations in growth rates that don’t precisely align with broader AI trends. Both Broadcom and Marvell saw significant pre-results rallies, each hitting record highs in recent months.

Broadcom stands to benefit from the surge in AI-driven initiatives across the tech sector, particularly as heavyweights like Microsoft increase data center spending, where Broadcom supplies critical networking chips.

For the fiscal first quarter ending Feb. 4, Broadcom reported a quadrupling of AI revenue from a year earlier to $2.3 billion, effectively offsetting the current slowdown in enterprise and telecommunications sectors. Semiconductor solutions revenue for the first quarter reached $7.39 billion, slightly below Visible Alpha estimates of $7.45 billion.

Investing on a Friday is like ordering dessert before the main course – it’s the sweet anticipation of potential gains to savor over the weekend. Whether you’re chasing the trends or bucking the norms, Fridays offer a tantalizing cocktail of excitement and strategy. So, grab your portfolio and dive into the market buffet, because when it comes to investing, Fridays aren’t just for casual Fridays – they’re for cashing in on clever decisions and toasting to financial success!