We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The Nasdaq notched a textbook "follow-through day."
Despite Jensen Huang's sudden resignation, stocks have shown resilience.
Strong AI fundamentals and spending persist.
Nasdaq Notches a Follow-Through Day
The “follow-through” day was created by legendary growth investor William J. O’Neil. Instead of trying to “catch a falling knife” in a downtrending market, the follow-through day forces investors to wait for evidence of follow on buying and volume to provide better reward-to-risk. Although not all follow-through days work, no major bull market has begun without one.
A follow-through day has 3 parts:
· A Rally Attempt (Day 1): The index being analyzed must stop making new lows and close higher.
· Day Count: Because the FTD’s are looking for follow through buying specifically and not short covering, investors should ignore days 1-2.
· The Follow-Through Day Signal: On day 4 or later, a FTD signal occurs when an index finishes up more than 1.5% or more on heavier volume than the prior session.
Wednesday, the Nasdaq 100 Index ETF ((QQQ - Free Report) ) signaled a day 4 follow-through day, rising 2.31% on heavier volume than the prior session. In addition to the FTD, QQQ regained its 200-day moving average – a bullish sign.
Image Source: TradingView
Strong Earnings, Higher Lows in Neoclouds
Neocloud providers such as CoreWeave ((CRWV - Free Report) ) and Nebius Group ((NBIS - Free Report) ) have been weighing down the AI industry. However, both companies reported extremely strong top-line growth this week. CoreWeave’s quarterly revenues jumped 168% year over year while Nebius Group’s revenues exploded 571% year over year. Zacks Consensus Analyst Estimates expect the Nebius triple-digit revenue growth to continue through next year.
Image Source: Zacks Investment Research
Meanwhile, after a brutal October, CoreWeave shares are finally making higher lows.
Image Source: Zacks Investment Research
NVIDIA News Failure
With a foundation that combines elite hardware performance, a decade-plus software moat, and best-in-breed data center engineering, NVIDIA ((NVDA - Free Report) ) has become the premier AI chipmaker. NVIDIA’s GPUs are the backbone of the world’s leading AI models, including “ChatGPT”, “Claude”, and almost every AI model in existence. In fact, NVIDIA is so integral to the AI boom that the market cap has swelled to nearly $4 trillion, making it the second-largest company in the world.
As AI became the fastest-growing industry, NVIDIA’s CEO Jensen Huang became arguably the most important CEO. Huang founded NVIDIA in 1993 and led the company to where it is today. However, on Thursday, Jensen Huang resigned as chief executive officer, president, and board member of NVIDIA following a major personal and national security scandal involving multiple alleged extramarital affairs.
Despite the news of Huang’s resignation, the Nasdaq was green for most of Thursday’s session while NVIDIA shares climbed from down more than 10% to down only 5%. If I had told Wall Street investors that Jensen Huang would be forced to resign a week ago, few would have predicted the fairly tame price action. Considering the massive fallout from AI’s most important CEO resignation, and the lack of price reaction, Thursday marks a classic bullish news failure.
Micron Regains the 200-day Moving Average
Micron ((MU - Free Report) ) is another AI bellwether that is worth watching for investors. After gaining more than 1,000% over the past 5 years, Micron shares finally suffered a deep pullback. However, earlier this week, Micron regained the 200-day moving average, signaling that the AI trade is still intact.
Image Source: Zacks Investment Research
AI CAPEX Spending is Increasing
Despite the plethora of fear, uncertainty, and doubt surrounding the AI trade, CAPEX spending continues to soar. For instance, Q3 is shaping up to be the most aggressive CAPEX increase this entire cycle.
Image Source: Zacks Investment Research
Meanwhile, hyperscaler CAPEX spending is expected to soar from $750 billion this year to ~$1.4 trillion next year.
Bottom Line
While volatility and headline shocks can easily shake weak hands out of the market, the price action and fundamentals ultimately tell the true story. Between a confirmed Nasdaq follow-through day, resilient technical support across key chipmakers, and nearly $1.4 trillion in projected hyperscaler CAPEX on the horizon, institutional appetite for the AI trade remains firmly intact. Investors who focus on volume, key moving averages, and accelerating revenue growth rather than short-term fear will be best positioned for the next leg higher.
View the Zacks #1 Rank List
Image: Shutterstock
5 Bullish Signs the AI Rally is Back on Track
Key Takeaways
Nasdaq Notches a Follow-Through Day
The “follow-through” day was created by legendary growth investor William J. O’Neil. Instead of trying to “catch a falling knife” in a downtrending market, the follow-through day forces investors to wait for evidence of follow on buying and volume to provide better reward-to-risk. Although not all follow-through days work, no major bull market has begun without one.
A follow-through day has 3 parts:
· A Rally Attempt (Day 1): The index being analyzed must stop making new lows and close higher.
· Day Count: Because the FTD’s are looking for follow through buying specifically and not short covering, investors should ignore days 1-2.
· The Follow-Through Day Signal: On day 4 or later, a FTD signal occurs when an index finishes up more than 1.5% or more on heavier volume than the prior session.
Wednesday, the Nasdaq 100 Index ETF ((QQQ - Free Report) ) signaled a day 4 follow-through day, rising 2.31% on heavier volume than the prior session. In addition to the FTD, QQQ regained its 200-day moving average – a bullish sign.
Image Source: TradingView
Strong Earnings, Higher Lows in Neoclouds
Neocloud providers such as CoreWeave ((CRWV - Free Report) ) and Nebius Group ((NBIS - Free Report) ) have been weighing down the AI industry. However, both companies reported extremely strong top-line growth this week. CoreWeave’s quarterly revenues jumped 168% year over year while Nebius Group’s revenues exploded 571% year over year. Zacks Consensus Analyst Estimates expect the Nebius triple-digit revenue growth to continue through next year.
Image Source: Zacks Investment Research
Meanwhile, after a brutal October, CoreWeave shares are finally making higher lows.
Image Source: Zacks Investment Research
NVIDIA News Failure
With a foundation that combines elite hardware performance, a decade-plus software moat, and best-in-breed data center engineering, NVIDIA ((NVDA - Free Report) ) has become the premier AI chipmaker. NVIDIA’s GPUs are the backbone of the world’s leading AI models, including “ChatGPT”, “Claude”, and almost every AI model in existence. In fact, NVIDIA is so integral to the AI boom that the market cap has swelled to nearly $4 trillion, making it the second-largest company in the world.
As AI became the fastest-growing industry, NVIDIA’s CEO Jensen Huang became arguably the most important CEO. Huang founded NVIDIA in 1993 and led the company to where it is today. However, on Thursday, Jensen Huang resigned as chief executive officer, president, and board member of NVIDIA following a major personal and national security scandal involving multiple alleged extramarital affairs.
Despite the news of Huang’s resignation, the Nasdaq was green for most of Thursday’s session while NVIDIA shares climbed from down more than 10% to down only 5%. If I had told Wall Street investors that Jensen Huang would be forced to resign a week ago, few would have predicted the fairly tame price action. Considering the massive fallout from AI’s most important CEO resignation, and the lack of price reaction, Thursday marks a classic bullish news failure.
Micron Regains the 200-day Moving Average
Micron ((MU - Free Report) ) is another AI bellwether that is worth watching for investors. After gaining more than 1,000% over the past 5 years, Micron shares finally suffered a deep pullback. However, earlier this week, Micron regained the 200-day moving average, signaling that the AI trade is still intact.
Image Source: Zacks Investment Research
AI CAPEX Spending is Increasing
Despite the plethora of fear, uncertainty, and doubt surrounding the AI trade, CAPEX spending continues to soar. For instance, Q3 is shaping up to be the most aggressive CAPEX increase this entire cycle.
Image Source: Zacks Investment Research
Meanwhile, hyperscaler CAPEX spending is expected to soar from $750 billion this year to ~$1.4 trillion next year.
Bottom Line
While volatility and headline shocks can easily shake weak hands out of the market, the price action and fundamentals ultimately tell the true story. Between a confirmed Nasdaq follow-through day, resilient technical support across key chipmakers, and nearly $1.4 trillion in projected hyperscaler CAPEX on the horizon, institutional appetite for the AI trade remains firmly intact. Investors who focus on volume, key moving averages, and accelerating revenue growth rather than short-term fear will be best positioned for the next leg higher.