The tech trade is back, driven by A.I. craze and prospect of a less aggressive Fed
Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company’s event at Mobile World Congress Americas in Los Angeles, California, U.S., on Monday, Oct. 21, 2019.
Patrick T. Fallon | Bloomberg | Getty Images
Forget about the debt ceiling. Tech investors are in buy mode.
The Nasdaq Composite closed out its fifth-straight weekly gain on Friday, jumping 2.5% in the past five days, and is now up 24% this year, far outpacing the other major U.S. indexes. The S&P 500 is up 9.5% for the year and the Dow Jones Industrial Average is down slightly.
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Excitement surrounding chipmaker Nvidia’s blowout earnings report and its leadership position in artificial intelligence technology drove this week’s rally, but investors also snapped up shares of Microsoft, Meta and Alphabet, each of which have their own AI story to tell.
And with optimism brewing that lawmakers are close to a deal to raise the debt ceiling, and that the Federal Reserve may be slowing its pace of interest rate hikes, this year’s stock market is starting to look less like 2022 and more like the tech-happy decade that preceded it.
“Being concentrated in these mega-cap tech stocks has been where to be in this market,” said Victoria Greene, chief investment officer of G Squared Private Wealth, in an interview on CNBC’s “Worldwide Exchange” Friday morning. “You cannot deny the potential in AI, you cannot deny the earnings prowess that these companies have.”
To start the year, the main theme in tech was layoffs and cost cuts. Many of the biggest companies in the industry, including Meta, Alphabet, Amazon and Microsoft, were eliminating thousands of jobs following a dismal 2022 for revenue growth and stock prices. In earnings reports, they emphasized efficiency and their ability to “do more with less,” a theme that resonates with the Wall Street crowd.
But investors have shifted their focus to AI now that companies are showcasing real-world applications of the long-hyped technology. OpenAI has exploded after releasing the chatbot ChatGPT last year, and its biggest investor, Microsoft, is embedding the core technology in as many products as it can.
Google, meanwhile, is touting its rival AI model at every opportunity, and Meta CEO Mark Zuckerberg would much rather tell shareholders about his company’s AI advancements than the company’s money-bleeding metaverse efforts.
Enter Nvidia.
The chipmaker, known best for its graphics processing units (GPUs) that power advanced video games, is riding the AI wave. The stock soared 25% this week to a record and lifted the company’s market cap to nearly $1 trillion after first-quarter earnings topped estimates.
Nvidia shares are now up 167% this year, topping all companies in the S&P 500. The next three top gainers in the index are also tech companies: Meta, Advanced Micro Devices and Salesforce.
The story for Nvidia is based on what’s coming, as its revenue in the latest quarter fell 13% from a year earlier because of a 38% drop in the gaming division. But the company’s sales forecast for the current quarter was roughly 50% higher than Wall Street estimates, and CEO Jensen Huang said Nvidia is seeing “surging demand” for its data center products.
Nvidia said cloud vendors and internet companies are buying up GPU chips and using the processors to train and deploy generative AI applications like ChatGPT.
“At this point in the cycle, I think it’s really important to not fight consensus,” said Brent Bracelin, an analyst at Piper Sandler who covers cloud and software companies, in a Friday interview on CNBC’s “Squawk on the Street.”
“The consensus is, on AI, the big get bigger,” Bracelin said. “And I think that’s going to continue to be the best way to play the AI trends.”
Microsoft, which Bracelin recommends buying, rose 4.6% this week and is now up 39% for the year. Meta gained 6.7% for the week and has more than doubled in 2023 after losing almost two-thirds of its value last year. Alphabet rose 1.5% this week, bringing its increase for the year to 41%.
One of the biggest drags on tech stocks last year was the central bank’s consistent interest rate hikes. The increases have continued into 2023, with the fed funds target range climbing to 5%-5.25% in early May. But at the last Fed meeting, some members indicated that they expected a slowdown in economic growth to remove the need for further tightening, according to minutes released on Wednesday.
Less aggressive monetary policy is seen as a bullish sign for tech and other riskier assets, which typically outperform in a more stable rate environment.
Still, some investors are concerned that the tech rally has gone too far given the vulnerabilities that remain in the economy and in government. The divided Congress is making a debt ceiling deal difficult as the Treasury Department’s June 1 deadline approaches. Republican negotiator Rep. Garret Graves of Louisiana told reporters Friday afternoon in the Capitol that, “We continue to have major issues that we have not bridged the gap on.”
Treasury Secretary Janet Yellen said later on Friday that the U.S. will likely have enough reserves to push off a potential debt default until June 5.
Alli McCartney, managing director at UBS Private Wealth Management, told CNBC’s “Squawk on the Street” on Friday that following the recent rebound in tech stocks, “it’s probably time to take some of that off the table.” She said her group has spent a lot of time looking at the venture market and where deals are happening, and they’ve noticed some clear froth.
“You’re either AI or you’re not right now,” McCartney said. “We really have to be ready to see if we don’t get a perfect debt ceiling, if we don’t get a perfect landing, what does that mean, because at these kinds of levels we are definitely pricing in the U.S. hitting the high note on everything and that seems like a terribly precarious place to be given the risks out there.”
From left, Notion founders Akshay Kothari, Ivan Zhao and Simon Last.
Notion
OpenAI’s public launch of ChatGPT in November 2022 is widely viewed as the event that kicked off the generative AI boom, which remains the dominant theme in the tech industry almost three years later.
Notion jumped on the bandwagon early.
Two weeks before ChatGPT hit the market, the productivity software startup announced its own artificial intelligence feature using an OpenAI model. Notion AI was designed to be a “writing assistant” that could help a user with brainstorming, editing and summarizing, the company said.
“We’re at an important inflection point,” CEO Ivan Zhao wrote in a blog post at the time. “The potential of artificial intelligence has grown exponentially, and will continue to grow.”
The AI wave has pushed Notion past $500 million in annualized revenue, the company now tells CNBC, which ranked the company 34th on its 2025 Disruptor 50 list. The latest developments landed on Thursday as Notion launched a customizable agent that can create documents to pull in data from many sources, using models from the likes of OpenAI and Anthropic.
Akshay Kothari, Notion’s co-founder and operating chief, said in an interview that the company is racing to keep up with enterprise demand for AI tools. Corporate clients include Kaiser Permanente, Mitsubishi Heavy Industries, Nvidia and Volvo Cars.
“We’re doubling this year and likely going to double the sales team next year,” Kothari said. He added that about 90% of the business comes from “multiplayer usage,” or teams of workers.
Notion was founded in 2013, two years before OpenAI was created as a nonprofit AI lab. The company, which now has about 1,000 employees, launched the first version of its product in 2016 and says it has over 100 million users.
But unlike most startups that have boomed with the rise of generative AI, Notion hasn’t raised outside capital in a long time. Its most recent fundraising round came in 2021, when the big driver for cloud-based collaboration software was the Covid pandemic and remote work. In October of that year, Notion raised $275 million at a $10 billion valuation.
Kothari says the company has more cash on hand than the $330 million it’s raised to date.
In May, Notion introduced Ai products for summarizing meetings and searching through corporate files. Annual revenue growth has accelerated every month since then, Kothari said, though he declined to provide growth rates.
Thursday’s announcement includes the rollout of a preview of an additional feature called custom agents, which can perform actions in the background. As an example, a custom agent can be instructed to produce and send a list of articles that are relevant to a person’s interests every week.
Kothari said that last year 10% to 20% of Notion customers were paying for AI add-ons. That shot up to 30% or 40% earlier this year and recently crossed 50%, he said.
At that point, the company started including AI in its business and enterprise plans, without charging extra, Kothari said, adding that the company is talking with clients about a fair pricing model for custom agents.
Productivity software is a highly competitive space, with Microsoft and Google at the center.
Weeks after Notion’s big financing round in 2021, Microsoft announced Loop, an app for working on documents. The product, which resembles Notion, became available to organizations with Microsoft 365 productivity software subscriptions in 2023.
Microsoft is also pushing Copilot, an AI assistant that can spit out Word documents and Outlook emails. Google, meanwhile, offers the Gemini AI option for its Google Workspace applications.
Ramp, a business credit card startup, pays for the Gemini AI option for Google Workspace apps. But the company has encouraged people to migrate documents and project tracking to Notion, said Ben Levick, Ramp’s head of operations, in an email.
Levick said that nine out of 10 employees at Ramp, which has a workforce of 1,200, now use Notion’s AI features every month, and the company is testing custom agents to answer internal inquiries and to connect sales feedback with forthcoming products that could address requests from clients.
WATCH: Salesforce CEO Marc Benioff on what the market is getting wrong about AI
Jaque Silva | Nurphoto | Getty Images
Google is adding more artificial intelligence into its Chrome browser as the search giant tries to fend off burgeoning competition from AI startups OpenAI and Perplexity.
In a blog post Thursday, Google said it’s rolling out Gemini in Chrome to users of Mac and Windows computers in the U.S. as well as to mobile devices. Users will be able to ask Gemini for help understanding the contents of a particular webpage, work across tabs, or do more within a single tab, such as schedule a meeting or search for a YouTube video.
“We are evolving the browser to help you get the most from the web – in ways we didn’t think possible even a few years ego,” said Rick Osterloh, Google’s senior vice president in charge of platforms and devices, in a statement. “And we are doing it while keeping the speed, simplicity and safety of Chrome that so many people love.”
Internet browsers are at the center of the battle for consumer AI supremacy because they serve as a key gateway to accessing information and content online.
Google and Apple have for years controlled most of the internet distribution points, which is a big reason the U.S. Department of Justice tried to force Google to divest Chrome as part of its antitrust case.
However, the judge in the case recently decided Google could keep Chrome, in large part because generative AI has dramatically changed the competitive landscape.
AI rivals are rolling out browsers to try and control more of the user experience. In January, OpenAI announced Operator, an agent that uses a browser to complete tasks, such as shopping using the Instacart app. The company is reportedly working on its own browser built upon the open-source Chromium code base.
Last month, Anthropic launched a browser-based artificial intelligence agent powered by its Claude AI models. Perplexity debuted its browser Comet in July for AI tasks, making it available to paying subscribers.
The new Gemini in Chrome integrates deeper with Google apps like Calendar, YouTube and Maps, so users can access those services without moving to a different webpage.
In the coming weeks, it will also be available to users of its enterprise productivity product Google Workspace, where users will have “enterprise-grade data protections,” Mike Torres, Google vice president of product, wrote in a blog post.
Google also announced new agentic capabilities for Gemini in Chrome. Agentic AI allows users to build customized services that can perform specific jobs.
In the coming months, users will be able to ask the Gemini agent to do certain tasks, such as booking a haircut or ordering weekly groceries. The agentic features were previously part of an internal project called “Project Mariner,” which was popular with employees.
Before Thursday’s announcement, Google required users to be signed up for certain Google subscriptions to access Gemini in Chrome. Now it’s more widely available with far more features.
WATCH: Dan Niles says Google will have the best AI app long term
Meta Chief Product Officer Chris Cox said on Thursday that smart glasses are the future of computing devices.
“We talk to them, we will see with them, we will use gestures the same way we interact with each other to interact with our computers,” Cox told CNBC’s Julia Boorstin. “The interfaces will get more natural, and so we certainly believe that the next really important wearable technology is going to be a pair of glasses.”
The $799 Meta Ray-Ban Display glasses, which were revealed on Wednesday, have a small in-lens display that is controlled with hand movements using a neural wristband.
Users will be able to record videos, as well as send messages via voice or physically using handwriting gestures on their knee, Cox said.
“We’ve started with just the basics, which is messaging, which we know is the thing people want to do in a more fluid way,” Cox said.
Unlike Meta’s previous audio-only Ray-Ban Meta smart glasses, the Displays allow people to see messages and watch videos.
During a demo, CEO Mark Zuckerberg unsuccessfully attempted to answer a video call from Meta tech chief Andrew Bosworth, as the button to accept the call failed to appear on the display.
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