AI-Driven Rally Boosts Tech Stocks, Broadcom Achieves Trillion-Dollar Milestone, Inflation Signals Caution

The tech-heavy Nasdaq 100 index, tracked by the Invesco QQQ Trust QQQ, continued its impressive ascent this week, reaching new record highs and closing in on the significant 22,000-point mark. This surge is primarily driven by strong investor enthusiasm surrounding the Magnificent Seven tech giants and the exciting promise of artificial intelligence.

Since the beginning of the year, the Nasdaq 100 has posted a remarkable gain of 30%, positioning itself to outperform the S&P 500 for the ninth time in the last decade. The index is on a trajectory that could see it double in value by year-end, aiming for a near 100% increase—an event last witnessed during the exceptional rise of 2019-2020, when it surged by 102%. Prior to that, similar gains were seen during the dot-com boom from 1998-1999.

This week, five out of the seven Magnificent Seven stocks—Apple Inc. AAPL, Amazon.com Inc. AMZN, Alphabet Inc. GOOGL, Meta Platforms Inc. META, and Tesla Inc. TSLA—registered fresh record highs. The total market capitalization of these companies has now surpassed an astonishing $18 trillion, exceeding China’s gross domestic product at the end of 2023.

Among the standout performers this week was Broadcom Inc. AVGO, which experienced a significant rise following a quarterly earnings report that surpassed expectations. Additionally, the company provided a positive outlook for AI-driven growth in the coming year. This rally in Broadcom's stock propelled it into the exclusive $1 trillion market capitalization club, ranking it as the eighth-largest publicly traded company.

However, recent inflation data released this week revealed some potential concerns. Consumer inflation rose by 2.7% on a year-over-year basis in November, consistent with expectations. Nevertheless, producer inflation surged to 3% year-over-year, surpassing the anticipated 2.6%, marking the steepest increase since February 2023. This rise has sparked worries about the likelihood of increased costs being passed on to consumers.

Market sentiment has led investors to fully anticipate a 25-basis-point interest rate cut at the Federal Reserve's upcoming meeting on December 18. However, it seems that policymakers might indicate a slower pace of rate cuts for 2025, suggesting potentially only three cuts, while also leaving the door open for a pause as soon as January.

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