Yesterday, the overall U.S. stock market witnessed a strong rally buoyed by a positive Consumer Price Index (CPI) report, a key inflation measure. This pushed the S&P 500 (SPX) and Nasdaq Composite to record highs amid optimism for potential 2024 interest rate cuts. Also, Artificial intelligence (AI) companies such as Nvidia (NASDAQ:NVDA), Arm Holdings (NASDAQ:ARM), C3.ai (NYSE:AI), and Micron Technology (NASDAQ:MU), gained about 3.6%, 8.1%, 1%, and 4.2%, respectively.
CPI Data Propels AI Stocks Higher
May’s inflation report came in cooler than expected, with prices rising only 3.3% year-over-year compared to forecasts of 3.4%. Core inflation, which excludes volatile food and energy prices, also indicated a slowdown, dropping to 3.4% from April’s 3.6%.
The better-than-expected CPI data boosted investor optimism that the Federal Reserve will begin lowering its benchmark federal funds rate later this year. This, in turn, fueled hopes of a stronger economy with increased consumer spending, a boon for AI companies.
Importantly, this positive economic development builds upon the already strong momentum in the AI sector. Investors remain bullish on the sector due to the sustained high demand for AI products and services.
Another Positive Catalyst for NVDA
In addition, Nvidia investors are encouraged by the company’s recent 10-for-1 stock split. Following the split, nine Wall Street analysts reiterated a Buy rating on NVDA stock.
Among the bullish analysts, Jim Kelleher from Argus raised the firm’s price target on Nvidia to $150 (19.81% upside potential) from $110. Kelleher believes Nvidia is well-positioned for further growth in Fiscal 2025, driven by increased demand for its gaming, professional visualization, and automotive offerings.
Interestingly, Kelleher ranks among the top 1% of Street stock experts. For further insights into his track record, click here.
Which AI Stock is Best to Buy?
Among the above-mentioned four AI stocks, both NVDA and MU have a Strong Buy consensus rating, ARM has a Moderate Buy, and C3.ai has a Hold rating. Among these stocks, Nvidia and Micron both have an Outperform Smart Score of eight, which indicates their potential to beat market averages.
