CNBC Daily Open: Nvidia, A.I. and markets

Nvidia shares rose sharply yesterday, helping to boost other tech and semiconductor stocks. Some analysts believe the optimism may be due to "AI-induced hallucinations."

CNBC Daily Open: Nvidia, A.I. and markets

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Nvidia's shares surged yesterday and helped other semiconductor and tech companies. Is the optimism a result of AI?

What you should know today

Nvidia's shares soared by 24% when it announced that its sales would exceed Wall Street expectations for the current quarter by more than half. At its current share price of $379, the semiconductor company has a market capitalization of $939 billion, putting it within arm's length of the hallowed trillion-dollar-company club.

Other semiconductor companies, like AMD, ASML, and TSMC, have also benefited from the frenzy surrounding Nvidia shares. Intel's shares fell. The manufacturers of traditional computer chip are losing out to the producers of graphics chips, because these chips power artificial-intelligence applications.

U.S. stocks mixed on Thursday. Nvidia surge helped tech-heavy Nasdaq composite to rise, but Dow Jones Industrial Average fell. European markets were lower. The DAX Index in Germany fell by 0.3%, as the country entered a recession.

The bipartisan debt ceiling agreement -- which is still being hammered out by both Democrats and Republicans -- was meant to be an agreement between the two parties. Republicans see the vote to increase the debt ceiling as a concession made to Democrats. They are asking for these things in exchange.

PRO Did you miss out on Nvidia’s rally? Other AI stocks are also popular among high-profile investors such as Stanley Druckenmiller’s Duquesne Family Office, and Dan Loeb’s Third Point.

Bottom line

AI can sometimes have hallucinations. It can give an incorrect, or even a completely made up, answer.

The explosive growth in Nvidia's and AI-related sectors yesterday was not a hallucination, at least from the outside. Nvidia shares have been skyrocketing. (I'm out of words for how to describe their stratospheric increase). Here are some quick stats on the impact of Nvidia's rise in the market.

The S&P technology sector gained 4.45% on the day, its biggest gain in a single day since November 30.

The VanEck Semiconductor ETF rose 8.6%, closing at its highest level for the year. It briefly reached a 52-week trading high during the day.

Microsoft rose 3.85%, and Alphabet grew 2.2%. Both tech giants have a leading position in AI.

It's not surprising that the Nasdaq, which is dominated by tech, grew 1.71% while the S&P, which is more diversified, grew 0.88%.

Dylan Kremer is the co-chief investment officers of Certuity Wealth Management. He said that innovation in technology could outweigh a slowing economic environment. "Growth Stocks are not Dead."

Kremer is not the only one who shares his optimism. Peter Boockvar of Bleakley Advisory Group pointed out that tech's rising tide isn’t lifting all sectors. The Dow Jones Industrial Average dropped 0.11% and closed below its 200-day average, a sign it could continue to fall. The Russell 2000 Index which tracks 2,000 smaller companies fell by 0.7%.

Tech and AI cannot save an economy in decline.

Boockvar stated that there are serious economic holes which we cannot ignore. If the AI craze fades, the public will realize that Microsoft, Google, and Amazon's business trends are slowing down because we all share the same economic atmosphere.

Steve Blitz is the chief U.S. economics at TS Lombard.

Blitz stated that "AI is real." It's a question of whether AI is causing investors to be optimistic or not.