Tesla surpassed its 2021 peak on Wednesday, and Alphabet reached a record high for the first time since July, as four of the tech industry’s seven megacap companies closed at all-time highs. This surge in the stock prices of major tech companies helped push the Nasdaq past 20,000 for the first time ever. Among the largest tech firms, only Nvidia and Microsoft remain below their record levels, while Apple saw a slight dip from its previous all-time high set the day before.
On Wednesday, the Nasdaq rose by 1.8%, closing at a new all-time high of 20,034.89, marking a 33% gain for the year. The rally was driven by the strong performance of the so-called “megacaps” — the seven largest tech companies, which collectively added around $416 billion to their market capitalization in a single day. Alphabet, Tesla, Amazon, and Meta all saw their stock prices hit new highs, showcasing the continued dominance of these tech giants in the market.
Alphabet’s stock closed at $195.40 on Wednesday, surpassing its previous peak of $191.18 set on July 10. The company’s recent two-day 11% rally was fueled by the unveiling of its new quantum computing chip, which the company described as a major breakthrough. The chip is expected to play a key role in fields such as drug discovery, battery design, and other practical applications. Alphabet’s rally highlights the growing optimism surrounding its innovation and leadership in the tech space, particularly in emerging technologies like quantum computing.
Tesla, on the other hand, had been under its previous record for a much longer period. Shares of the electric vehicle maker surged nearly 6% on Wednesday to $424.77, marking a new high above its prior closing record of $409.97 from November 2021. This jump in Tesla’s stock comes amid increasing optimism on Wall Street following Donald Trump’s victory in the presidential election. The stock has risen 69% since Trump’s election, driven by hopes that the new administration may have a positive impact on Tesla, particularly given CEO Elon Musk’s close relationship with the incoming president.
While Amazon, Apple, and Meta have all been consistently reaching new highs in recent months, Apple experienced a slight dip of 0.5% on Wednesday. Microsoft is approximately 4% below its record high from July, and Nvidia is 6% off its most recent peak set in October. Despite these variances, the overall trend for the tech sector has been positive, with most of the megacaps continuing to perform well.
The weight of these megacap tech stocks in the market has played a crucial role in the Nasdaq’s impressive gains. The index’s rise reflects a broader trend in which large tech companies are propelling the market forward, creating a significant impact on overall investor sentiment. Investors have been particularly bullish on the prospects for tech companies, as they stand to benefit from potential regulatory changes under the new administration and the broader macroeconomic environment.
A key factor behind the tech sector’s rally is investor optimism that the Federal Reserve will soon cut interest rates. The latest economic data, including the consumer price index (CPI), showed inflation at a 12-month rate of 2.7% in November. This has reinforced market expectations that the Fed may lower rates in the coming months, which would provide a more favorable environment for tech stocks. Lower interest rates tend to benefit growth stocks like those of the megacaps, as it reduces the cost of borrowing and boosts valuations.
Tom Lee, managing partner at Fundstrat Global Advisors, noted in an interview on CNBC’s “Closing Bell” that investors are expecting further gains in tech stocks, driven by the anticipation of a rate cut. He explained that megacap companies are particularly sensitive to changes in interest rates, and the recent economic data has increased the likelihood of a December rate cut. This expectation is seen as a positive for the tech sector, as it could further fuel the growth of these dominant companies.
The broader market’s optimism is also driven by political factors, particularly the new administration’s approach to tech regulation. On Tuesday, President-elect Trump announced his nomination of Andrew Ferguson as the next chair of the Federal Trade Commission (FTC), replacing Lina Khan, who was known for her aggressive stance on antitrust enforcement against big tech companies. Ferguson, currently one of the FTC’s five commissioners, has been described by Trump as being “America First” and “pro-innovation,” signaling a potential shift in the regulatory landscape for the tech industry. Investors are hopeful that this could lead to a more favorable regulatory environment for tech firms, allowing them to operate with fewer restrictions and potentially pursue more acquisitions or business expansion.
In conclusion, the performance of tech’s megacap companies has been a key driver of the Nasdaq’s recent rally, with Tesla, Alphabet, Amazon, and Meta all hitting new records. The overall market sentiment has been boosted by expectations of a favorable regulatory environment and the possibility of interest rate cuts. These factors, combined with the ongoing strength of the tech sector, have led to strong investor confidence as we head into 2025. As the tech giants continue to dominate the market, the Nasdaq’s rise past 20,000 marks a significant milestone in the ongoing growth of the tech industry.
