Nasdaq Wrap: Should investors buy Tesla before October 10, and is Microsoft gifting Nvidia's holders?

Nasdaq Wrap is our weekly look at the highly influential, tech-heavy Nasdaq 100 index – movers and shakers over the past seven days or so, talking points and a brief look at what’s ahead.

Tech stocks poised for further growth in Q4
Tesla’s robotaxi event on October 10th builds excitement
Microsoft pressured by reliance on Nvidia

The week that was

US stocks kept climbing for a third week in a row and hit fresh records, riding the wave of optimism from the recent interest rate cut by the Fed Reserve.

The market is feeling pretty good at the moment that the US economy is cooling off without heading for a crash.

Last week’s data shows that the Personal Consumption Expenditures (PCE) index, the Fed’s favourite inflation index, has eased, while consumer sentiment has improved for the second month in a row.

Treasury yields are also falling, indicating the market is anticipating further, imminent interest rate cuts.

But the market’s focus last week was firmly on China.

Officials there rolled out a series of measures aimed at boosting consumption, property demand, and stock market liquidity in the country.

The move sent Chinese equities soaring, with the Shanghai Composite and Hong Kong’s Hang Seng both jumping by an impressive 13%, marking their best weekly performance since 2008.

“Based on historical valuation, we think Chinese stocks have another 20% runway to go,” said David Chao at Invesco Asset Management.

The Chinese move also boosted prices for copper, lithium, silver, and iron ore during the week.

“What happens here and what is decided here has big consequences for our own economy, our own workers and businesses and investors, and for our country more broadly,” said Treasurer, Jim Chalmers.

And even though the Nasdaq 100 ended the week on a low note on Friday – thanks in part to Nvidia taking a hit over concerns about its chips being spurned in China – the overall vibe was overall optimistic.

Tech stocks could march on in Q4

Despite the September Effect, which is historically the worst-performing month for nearly a century, the S&P 500 and Nasdaq 100 are so far up by around 3% each.

And as we head into October, US stocks seem to be shrugging off the typical jitters associated with election season.

The S&P 500 has just wrapped up its best first nine months since 1997, posting a solid 5% gain in Q3 alone. This has even pushed its market cap past the US$50 trillion mark for the first time.

Traders are feeling optimistic, with a drop in the put-call ratio indicating a bullish market sentiment.

Read more about the Put-Call ratio here: How to read market mood and find the ASX stocks investors are bullish about

Many are betting on technology stocks to lead the charge as we move into the fourth quarter.

“I’m really bullish on stocks,” said Mary Ann Bartels at Sanctuary Wealth.

“The chip rally has paused, and people have taken notice. But Big Tech and semis will lead this market higher in the fourth quarter”.

Last week’s Nasdaq stock highlights

Nvidia (NASDAQ:NVDA)

Nvidia is up around 4% for the week following news that CEO Jensen Huang has completed the sale of his shares, reaching the cap of 6 million shares permitted under his trading plan.

Huang has been selling a huge amount of shares in Nvidia in the past few months, worth more than US$700 million, according to regulatory filings.

He still owns over 75 million shares directly and another 785 million through trusts.

Nvidia was also boosted last week after positive earnings from Micron, a key partner, which indicated strong demand for AI.

Most analysts remain optimistic about Nvidia, with almost all rating it a “buy” and setting a target price of about US$152 on average, versus current price of US$121.35.

But Nvidia’s stock fell 2% on Friday after China urged local companies to avoid purchasing Nvidia’s H20 series microchips, which are essential for AI applications.

Analysts believe the long-term effects on Nvidia from US-China trade war may involve a shrinking market share in China and heightened competition from local chipmakers.

Tesla (NASDAQ:TSLA)

Tesla popped 5% earlier in the week ahead of the company’s Robotaxi Day on October 10th where it will be showcasing its Full Self-Driving technology.

Bank of America said in a note that if the Robotaxi Event goes well, it could really boost Tesla, as Tesla’s flair at these events often gives the stock a nice lift.

This will be one for the history books pic.twitter.com/qQ0HZyGMZE

— Elon Musk (@elonmusk) September 26, 2024

The question is, should you buy Tesla stock before October 10th?

Wedbush Securities analyst Dan Ives, a longtime Tesla bull, said that he anticipates “some notable updates” from Musk and Tesla during the event.

“The next phase of the Tesla growth story is around autonomous, robotaxis, and AI playing out for the Tesla ecosystem over the coming year,” Ives wrote.

Microsoft (NASDAQ: MSFT)

Microsoft received a rare downgrade from Wall Street as some analysts are worried the tech giant relies too much on Nvidia for its AI tech and that its competitors have closed the gap.

Analysts at D.A. Davidson lowered Microsoft’s rating from Buy to Neutral but kept the price target at US$475, versus current price of US$428.

They noted that Microsoft’s early investments and AI product launches gave it a leg up over Amazon and Google, who were both “caught flat-footed.”

Since then, Amazon and Google “have invested in catching up to Microsoft, and we think you can start telling that they’ve caught up,” said Gil Luria at D.A. Davidson in a Yahoo Finance interview.

Looking ahead, Luria believes that AWS (Amazon Web Services) and GCP (Google Cloud Platform) could have an edge over Microsoft Azure because they can deploy their own chips in their data centres, which are much cheaper than Nvidia GPUs—something Microsoft hasn’t done yet.

The analysts at D.A. Davidson noted that Microsoft is “beholden” to Nvidia, its AI chip supplier.

“Microsoft is so reliant on Nvidia that it’s almost transferring wealth from its own shareholders to Nvidia shareholders.”

Uxin (NASDAQ:UXIN)

And here’s one Nasdaq stock you may never have heard about.

Uxin is a leading e-commerce platform for buying and selling used cars in China.

The company’s shares rose over 200% and was the best performing stock last week after the company reported impressive first-quarter earnings, with revenue jumping by 39%.

This growth reflects Uxin’ shift to retail sales, focusing on direct sales to consumers rather than just dealers.

Transaction volume surged 72%, and Uxin said it expects to turn a profit in terms of EBITDA by the end of the year.

The Week Ahead

The week is significant for economic data, particularly with the release of the September jobs report on Friday.

The Federal Reserve is closely monitoring the labour market for signs of weakness following its recent interest rate cut.

Fed Chair Jerome Powell spoke last night at the annual meeting of the National Association for Business Economics in Nashville, with other officials also scheduled to share their insights throughout the week.

In addition to the jobs report, investors will be looking at the Purchasing Managers’ Index (PMI) surveys for both the manufacturing and services sectors, along with data on construction spending and factory orders.

Earnings reports from major brands like Nike and Levi Strauss will also be in focus.

Nike is set to report as it transitions to a new CEO, while Levi’s earnings come amid speculation about a potential endorsement deal with superstar Beyoncé.

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