We are exploring tech and Chuck Saletta, a notable contributor to Motley Fool, explores the recent performance of four prominent US stocks: Tesla, NVIDIA, Apple, and Microsoft.
What a difference a month makes
Thanks to a combination of a Federal Reserve inspired relief rally and some solid company-specific news, these four US stocks have delivered great short-term gains.
Earlier this month, we looked at the performance of four of the largest US stocks - and as is typical for many stocks, their prices have been volatile, moving both up and down based on both their operational performance and the whims of the market over time.
That previous performance snapshot was taken as of October 27, 2023. Between then and this more recent one -- as of November 21, 2023, just less than a month later, all four of those companies have seen their shares skyrocket.
Some of that has to do with the businesses themselves, and some of it has to do with a major macroeconomic shift in the United States since that last snapshot. So without further delay, here’s a brief update on Tesla, NVIDIA, Apple, and Microsoft.
First, the big-picture news affecting everyone
The overall US stock market has performed pretty well since the beginning of November, buoyed by the news that the US Federal Reserve held interest rates steady at their November 1 meeting. Investors had been concerned that the Federal Reserve could continue raising rates, which had put a lid on potential stock gains.
The reason for that lid is the fact that most people have limited amounts of money that they can invest. Smart investors make decisions on where to invest based on both the potential returns they can get and the risks they take by investing. Because bonds are higher up on the corporate priority list than stocks, any company’s bond is viewed as less risky than its stock.
Higher interest rates translate directly into higher returns on bonds, which would make them relatively more attractive to investors. In addition, the higher interest rates are, the more companies have to pay on their debts as their either roll them over or take out new ones. The more they’re paying on debt service, the less they have available to invest in their future growth prospects.
That the Federal Reserve held interest rates steady meant that it was less likely that investors would continue to shift money from stocks to bonds. That sparked a relief rally in the US stock market.
Tesla (NASDAQ: TSLA)
On October 27, Tesla’s shares closed at $207.30. As of November 21, they traded hands at $241.20. That’s a substantial 16% gain in less than a month. In addition to the general market movement, part of Tesla’s gains came from the fact that it showed that it still had pricing power, raising the prices of its Chinese market Model 3 and Model Y cars.
Previously, Tesla had taken some flack for lowering prices in the United States, leading to concerns that it would force a collapse in the company’s margins. The fact that it is still able to increase prices in parts of its business went a long way toward addressing fears that we were starting to see a commoditized race to the bottom in electric vehicle pricing.
NVIDIA (NASDAQ: NVDA)
Jumping from $405.00 on October 27 to $499.44 on November 21, NVIDIA’s shares have seen a phenomenal 23% gain in under a month. NVIDIA’s shares have benefitted from its role as a “picks and shovels” player for Artificial Intelligence platforms.
Most AI platforms benefit from heavy use of parallel computing, which is something that NVIDIAs high-end GPUs can generally do quite well. Indeed NVIDIA released earnings on November 21 indicating that its revenues tripled in its most recent quarter vs. the same quarter a year ago, buoyed by AI-related sales.
While growth rates like that are not likely sustainable in a company as large as NVIDIA is, the fact that it had enough demand to deliver such an astounding increase shows that the pull for AI technology is real.
Apple (NASDAQ: AAPL)
Another great gainer, Apple saw its shares leap from $168.22 on October 27 to $190.64 on November 21. It also went ex-dividend on a $0.24 per share dividend in that window, leading to a total return of around 13% in just a few weeks.
Bolstering Apple’s fortunes are statements made in court that Apple gets sweetheart deals from the likes of Google’s parent company Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). Apple gets a whopping 36% royalty on ads on Google searches performed on Apple devices. That’s a testimony to just how valuable Apple’s generally higher-income consumers are when it comes to digital commerce.
Microsoft (NASDAQ: MSFT)
Also benefitting from the AI trend, Microsoft saw its shares leap from $329.81 to $373.07 between October 27 and November 21. Add the $0.75 payment that has gone ex-dividend in that window, and Microsoft shareholders have seen a 13% boost in that same short time period.
More on the software side of AI than the hardware side, Microsoft is one of the biggest investors in OpenAI, the company behind ChatGPT. It’s also the biggest beneficiary of the recent board-driven shakeup at OpenAI. Thanks to its deep pockets and early wins with the ChatGPT type technology, Microsoft hired ousted ChatGPT founder Sam Altman, and looks likely to poach other OpenAI employees who were loyal to Altman.
Recognize the ups and downs of investing
As amazing as those short term returns have been in these four large US stocks, it’s important to remember that what the market gives easily, it can also take away, just as easily. Over the long haul, the US stock market has delivered returns around 10% on an annualized rate. Even those returns are not guaranteed, and as 2022 reminded us, some years can deliver quite negative returns.
The fact that each of these four companies have delivered gains bigger than that in under a month is partially due to the relief rally from the Federal Reserve’s decision to hold rates steady. It’s also partially due to the fact that during some months, the market will deliver excellent returns while other months, it will deliver horrible ones.
As an investor, it’s important to recognize that those swings will happen. Make your buy and sell decisions based on your assessment of a company’s long-term prospects rather than its short term price movements, and you’ll find yourself in a better spot to handle those swings.
Just to keep you in the loop, at the time of publication, Chuck Saletta owned shares of Microsoft.
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Sources: SSC, New York Times, JP Morgan, Reuters, Investors.com, Yahoo Finance, Bloomberg, Forbes, Open AI, Tech Crunch, Nerd Wallet.
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