US stocks: Nasdaq, S&P 500 lifted by Nvidia's forecast; investors eye speech by US Fed’s Warsh

The technology-heavy Nasdaq outperformed other market indices on Thursday, Aug 27, after Nvidia's strong revenue forecast reaffirmed the AI boom and bolstered technology stocks. Nvidia shares surged 8.7% following the impressive forecast, which exceeded investor expectations. Analysts believe the AI rally still has room to grow, as companies leading the AI transformation continue to deliver impressive growth, albeit at a higher cost and capital intensity.

Morgan Stanley noted that Nvidia's projected revenue growth of 70% in 2027 significantly outpaces the consensus estimate of 40%, suggesting continued growth potential.

The S&P 500 closed 55.29 points (0.72%) higher at 7,730.99, while the Nasdaq Composite gained 411.16 points (1.57%) to reach 26,541.35. The Dow Jones Industrial Average rose 105.56 points (0.2%) to 53,569.44. US chip-linked stocks also performed well, with the semiconductor index up 2.3%. The S&P 500's Information Technology sector led with a 3.4% gain, making it the best-performing sector among the S&P 500's 11 constituents, which were mostly in the red.

Despite Nvidia's earnings beat and optimistic guidance, not all market sectors benefited. The S&P 500's Information Technology sector's strong performance contrasted with weakness across other sectors, driven by factors like higher interest rates, geopolitical tensions, and global trade issues. Brent crude prices jumped over $2 per barrel after a Wall Street Journal report suggested US President Donald Trump was not interested in returning to the terms of an Iran memorandum of understanding reached in June.

Positive earnings reports from Salesforce and CrowdStrike helped ease concerns that advanced AI tools could disrupt the traditional software industry. Salesforce shares surged 22.6% after raising annual revenue and profit forecasts, while CrowdStrike climbed 20.5% following an increase in its annual revenue forecast and surpassing second-quarter earnings estimates.

These reports boosted investor confidence in beaten-down software stocks, narrowing the gap with semiconductors, which are considered the primary beneficiaries of the AI boom.

Other software firms, including ServiceNow and Palo Alto Networks, also saw their shares rise. However, companies such as Moderna and HP faced declines: Moderna dropped 4.6% after announcing a $2 billion convertible bond sale, and HP fell almost 3% due to declining shipments and margins in its PC unit.

With Nvidia's results out, investors are now focusing on US Federal Reserve Chair Kevin Warsh's first Jackson Hole address on Friday, where he is expected to offer insights into the central bank's stance on inflation data and efforts to lower yields. Warsh has consistently emphasized the supply side of the economy and is unlikely to be too definitive in his assessments.

Instead, he may express skepticism about previous policy assumptions and adopt an anti-doctrinaire approach. Recent economic data, such as a hotter-than-expected Personal Consumption Expenditures reading and comments from two Fed officials on Thursday, have dampened optimism and highlighted the central bank's concerns about inflation.