Dow Hits Record High Amid Nvidia’s Slump

The Dow Jones Industrial Average achieved a new record high on Thursday, reflecting a strong performance even as other major stock indices remained largely stagnant. This milestone occurred amid a significant downturn in shares of Nvidia, a key player in the artificial intelligence (AI) sector. Despite Nvidia’s influence on broader market trends, its post-earnings slump did not hinder the Dow’s upward trajectory.

On Thursday, the Dow surged nearly 0.6%, closing at an unprecedented 41,335.05. This impressive performance marked the third record close for the index in the same week, following highs of 41,240.52 on Monday and 41,250.50 on Wednesday. The Dow’s remarkable run underscores the strength of some of its key components, notably tech giants like Apple and Microsoft, which contributed significantly to the index’s gains. Apple, in particular, rose by 1.5%, while Microsoft added 0.6%, providing the necessary boost for the Dow to reach new heights. This robust performance is even more notable considering the Dow’s significant growth over the year. Starting 2024 at approximately 37,700 points, the index broke through the 40,000 mark by July and continued to climb. By Thursday, the Dow had accumulated a year-to-date gain of nearly 10%, showcasing its resilience and the confidence investors have in the blue-chip stocks that comprise the index.

While the Dow celebrated new records, Nvidia faced a starkly different scenario. The chipmaker, which has been a major force in the AI industry, saw its shares drop by 6.3% on Thursday, closing at $117.59. This decline came on the heels of Nvidia’s earnings report released on Wednesday, which, despite showcasing record-breaking numbers, failed to meet the lofty expectations of investors. Nvidia reported $0.67 earnings per share and an all-time high of $30 billion in sales for the latest quarter, surpassing analysts’ forecasts according to FactSet. Additionally, the company posted a record net income of $16.5 billion and a record $26.3 billion in revenue from its datacenter division, which is central to its computing and AI offerings. However, the market’s reaction was less than enthusiastic. The slump in Nvidia’s stock appears to stem from the fact that, despite these stellar results, they did not exceed expectations by the wide margins investors have come to expect from the company. Nvidia’s shares had already been under pressure earlier in the week, marking Thursday as the third consecutive day of losses for the tech giant.

The contrasting fortunes of Nvidia and the Dow highlight the complex dynamics at play in the stock market. Nvidia, though not a component of the Dow, has become a critical player in driving broader market trends due to its substantial market valuation and influence in the tech sector. However, its influence on Thursday was notably diminished. According to Bloomberg, Nvidia’s options represented a significantly lower share of the S&P 500’s single-stock options compared to earlier in the year. While the company still commands over 20% of these options, this figure was above 50% during the spring and early summer, indicating a reduced impact on the market’s overall direction. Furthermore, the S&P 500 and Nasdaq remained largely unchanged on Thursday. The S&P 500 edged down by less than 0.01%, and the Nasdaq closed with a 0.2% decline after experiencing gains earlier in the day. Thursday was also one of the slowest trading days of the year in terms of volume, which may have contributed to the muted response from these indices.

In addition to the Dow’s strong performance, the market received a further boost from positive economic data released on Thursday. The U.S. government revised its second-quarter gross domestic product (GDP) growth upwards from 2.8% to 3%, indicating a stronger-than-expected economic expansion. Additionally, weekly jobless claims fell, signaling ongoing strength in the labor market. These indicators bolstered investor confidence, helping to offset some of the concerns surrounding Nvidia’s performance and contributing to the Dow’s record-setting day.

The Dow’s ability to reach new record highs despite challenges from significant market players like Nvidia speaks volumes about its resilience. The index’s continued growth is driven by the strength of its key components, particularly in the technology sector. However, Nvidia’s recent slump serves as a reminder of the volatile nature of the stock market, where even the strongest companies can face setbacks. As the market continues to navigate the complexities of economic data, corporate earnings, and investor sentiment, the Dow’s performance will likely remain a key barometer of broader market trends. Investors will be watching closely to see if the index can maintain its momentum or if challenges, such as those faced by Nvidia, will eventually weigh it down. In the meantime, the record highs achieved by the Dow this week underscore the confidence investors have in the U.S. economy and the companies that drive it. While Nvidia’s slump may have raised some concerns, the overall market sentiment remains positive, with the Dow leading the charge in what has been a remarkable year for U.S. equities.