Interest Rates, AI Woodstock to Dominate Markets This Week

As this earnings season winds down, investors will be laser-focused this week on two major events: NVIDIA’s long-awaited GPU Tech Conference and the Federal Reserve’s Open Market Committee (FOMC) meeting.

Both events have the potential to move the markets. Let’s take a look at why they are so important.

AI Woodstock

NVIDIA’s GPU Tech Conference, more commonly known as GTC, is scheduled for March 18-21 at the San Jose Convention Center. The event, described by some as “AI Woodstock,” is set to kick off with a keynote speech by NVIDIA (NASDAQ:NVDA) founder and CEO Jensen Huang at 1 p.m. Pacific on Monday.

This year’s event is particularly significant for two reasons. First, it hasn’t been held live and in-person since 2019 due to COVID. Second, artificial intelligence has pretty much taken over the world since then — or at least, the markets.

NVIDIA is the poster child for AI, as its leadership in manufacturing chips that power more complex AI tasks has driven its massive earnings over the past five years.

Consider this fact. In 2019, when the last in-person GTC was held, NVIDIA had a market cap of about $109 billion and was the 81st-largest company in the world by market cap. Five years later, NVIDIA has a market cap of $2.1 trillion and is the third-largest company in the world.

Thus, a lot has certainly changed.

“Generative AI has moved to center stage as governments, industries and organizations everywhere look to harness its transformative capabilities,” Huang said. “GTC has become the world’s most important AI conference because the entire ecosystem is there to share knowledge and advance the state of the art.”

As mentioned, Huang is set to deliver the keynote on Monday in a speech billed as a “transformative moment in AI.” He is expected to introduce the next generation of AI chips, the B100, and talk about the rapid growth of Gen AI and what to expect going forward. Experts from OpenAI, Microsoft, Google, Meta Platforms, SAP Labs, Boston Dynamics and others are slated to speak throughout the conference. Some 16,000 people are expected to attend — four times more than were there in 2019.

Wall Street analysts are anticipating that the focus and attention on NVIDIA and AI will fuel the stock price, which is already up 87% this year to $901 per share. Prior to the conference, several analysts raised their price targets, including Bank of America, which boosted it to $1,100 per share from $925. Truist hiked its target to $1,117 from $911, and HSBC increased its target to $1,050 from $880.

However, the influence of this event could certainly go beyond NVIDIA stock, as it has the potential to move others in the AI space and beyond, as the technology has transcended semiconductors. 

What will the Fed do?

The other big event this week is the Federal Reserve’s FOMC meeting on Tuesday and Wednesday. As it traditionally does, the Fed is due to make a decision on interest rates at the end of the meeting on Wednesday afternoon.

Most analysts believe that the Fed will hold the federal funds rate where it has been since July 2023, at a range of 5.25% to 5.5%. However, Fed officials have indicated that rates have probably peaked and are likely to come down this year as inflation moves closer to the target range of 2% without significantly impacting employment or the economy. In other words, the “soft landing” that Fed officials have been targeting is coming into view.

Most likely, rates will remain unchanged as the Fed will probably want to see another month of progress toward its goals. Even if the federal funds rate doesn’t change, investors will be listening closely for more clues as to the timing of when rates will start to come down.

The markets tend to overreact to what the Fed says, so if this week’s commentary is at all viewed as positive, it should be catalyst for most stocks. On the other hand, any statement or commentary that is viewed as less than bullish could temporarily send stocks lower.

All in all, this should be a very interesting week for the stock markets.