The realm of technology and finance has seen a significant stir with the latest financial results disclosed by Nvidia, a powerhouse in artificial intelligence (AI) and graphics processingOn May 22, Nvidia announced a staggering net profit of $14.88 billion, marking an astounding year-on-year growth of 628%. Following this revelation, Nvidia's shares surged by more than 6% in after-hours trading, pushing the price to an impressive $1,000 per shareThis remarkable performance comes amidst a generally bearish day in the U.Sstock market, driven down by hawkish comments from the Federal Reserve regarding interest ratesHowever, this did not dampen the enthusiasm surrounding Nvidia, as cross-border exchange-traded funds (ETFs), particularly in the Chinese market, experienced notable gains, achieving all-time highs.

Nvidia’s success played a pivotal role in boosting investor confidence, causing a premium increase of over 2% for these ETFs

As of May 23, the Shanghai-listed U.Sstock 50 ETF (513850) closed at 1.217, up 1.33%, while the Nasdaq ETF (513300) reached 1.752, gaining 1.21%. This synergy illustrates how Nvidia's robust performance continues to resonate through broader markets, reinforcing its critical importance in shaping market sentiment.

Wall Street analysts have responded favorably to Nvidia's earnings report, raising the company's target price significantlyGoldman Sachs has set a new price target of $1,100 for the next 12 months, up from $875 just three months priorThis enthusiasm is reflected in the adjustment of earnings per share (EPS) forecasts for the fiscal years 2025 to 2027, with analysts anticipating an average increase of 8% in profitsThe weight of influential stocks like Nvidia carries profound implications for indices, with Nvidia constituting about 4% of the Nasdaq 100 IndexMatt Weller, the global research director of Gainscope Group, pointed out the prevailing bullish trend that seems to have solidified since the Nasdaq broke through the significant resistance level of 18,400 last week, hitting new historical highs.

Nvidia continues to stoke investor excitement for cross-border ETFs, and on May 23, as the stock closed at $949.5—down slightly by 0.46% after hours—it saw an extraordinary jump of 6.68% to $1,012.89 post-earnings announcement

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The earnings report surpassed Wall Street's estimates on both revenue and profits, with Nvidia projecting a sales figure of about $28 billion for the current quarter, although this represents only a doubling from the previous year due to the AI boom inflating quarterly performance comparisonsThe company reported a record revenue for the last quarter of $26 billion, while net profit soared from $2 billion the previous year to $14.88 billion.

Jensen Huang, the CEO of Nvidia, asserted the initiation of a new industrial revolution powered by AI, which he believes will significantly enhance productivity across virtually every industry, promoting better cost and energy efficiencyCurrent market interest is keenly focused on the upcoming Blackwell graphics processing unit (GPU), which is expected to launch in the latter half of the year, bolstered by substantial orders from tech giants such as Microsoft and Amazon.

Over the past twelve months, Nvidia's stock has more than doubled, pushing its market capitalization beyond $2 trillion

The company also announced a 1-for-10 stock split set to take effect on June 7, along with an increase in its dividend from 4 cents to 10 cents, which is anticipated to further buoy market sentiment.

Although the Federal Reserve's recent minutes indicated a hawkish stance, leading to a rebound in the dollar and declines in commodities and U.Sstocks, trading in U.Sstock ETFs in China remained robust, hitting new historic highs largely attributable to Nvidia's popularityLe Zhiyong, deputy director of equity investment at Morgan Stanley, highlighted that Nvidia has delivered five consecutive earnings reports exceeding market expectations since October 2022, which raises questions about the sustainability of growth within the AI sector at this junctureHuang emphasized in a conference call that this industrial revolution is beginning and reinforced that AI will evidently enhance productivity across nearly all industries.

Nvidia's business spans several key segments: gaming platforms, data centers, artificial intelligence, autonomous vehicles, and professional visualization, with data centers leading the charge

Wall Street's upgrades to Nvidia's target price arise from the consistent high demand for AI servers and improving supply conditions, particularly as Nvidia currently trades at a price-to-earnings ratio of 35, significantly below the median premium of 160% over the last three years.

Private equity managers note that Nvidia's major clients, predominantly the so-called "seven tech giants," have expressed optimistic forecasts for capital expenditures related to generative AI, indicating that demand for Nvidia's GPUs far exceeds supplyFor instance, Alphabet mentioned its progress in generative AI services and projected that its capital expenditure will exceed $12 billion in the remaining quarters of 2024 due to investments in technological infrastructureMicrosoft highlighted AI’s contributions to its Azure growth, indicating a strong upward trajectory and an expectation of substantial capital expenditure growth in mid-2024 as it aims to meet rising demand for its cloud and AI products.

However, some cautious optimism persists among institutional investors

A QDII investment manager expressed concern that, in the medium to long term, Nvidia's data center GPU business faces two significant challenges: worsening competitive dynamics as AMD and Intel enter the market, potentially affecting pricing and profit margins; and the considerable incentive and capability of each cloud service provider to develop proprietary AI acceleration chips, which, while unlikely to provide general compute services externally in the near future, may gradually replace some of Nvidia's existing chip market share for internal use.

Despite these challenges, institutions remain optimistic about the Nasdaq indexBy the end of Tuesday, the Nasdaq 100 Index had witnessed two straight days of slight gains, marking the second historical peak since the beginning of the weekAlthough U.Sstocks do not perfectly correlate with domestic cross-border ETFs, the overall direction of the U.S

stock index will likely dictate the movement of such ETFs.

“Nvidia has faced resistance at the $960 mark since early MarchHowever, the current conditions make it quite likely to surpass $1,000 and potentially climb toward $1,100 subsequently,” Weller notedRegarding the Nasdaq 100 index, the persistent maintenance of the key resistance level of 18,400 since last week supports continued upward movement, with several traders asserting that 19,000 is the next target.

In summary, the market will remain sensitive to macroeconomic data and Federal Reserve policy changesFed Chair Jerome Powell had previously indicated a higher likelihood of rate cuts; however, the recent statements from the Fed officials convey a willingness to tighten policy further if necessary, especially given the disappointing inflation data from Q1. Most institutions still expect U.Sinflation to trend downwards, with current market bets for a rate cut in September hovering around 50%. An economist from an international investment bank indicated that a characteristic of recent U.S

economic data is the weakness in cyclical and rate-sensitive sectors (like production, trade, and some investments), while consumption remains strong.

This unusual backdrop depicts a scenario where the U.Ssustains around 3% economic growth, yet the probability of recession remains alarmingly highHowever, key segments of the economy that have shown strength in consumption may begin to slow while the previously weak sections (production/investment) gradually improveGiven that consumption constitutes a greater share of the economy, growth might decelerate in the coming quarters, albeit from high levelsThe pivotal question will be: how fast is consumption slowing relative to the revival of investment/production? The answer hinges on inflation, which will determine the timing and extent of the Fed’s tightening measures.

UBS perceives that U.Sinflation's “stickiness” is fleeting and primarily concentrated on about two indicators (rent and travel). By autumn, the Fed should witness compelling evidence of economic slowdown and inflation improvement, home in on rate cuts