Tesla, Nvidia lead tech-heavy Nasdaq to one of best days of 2024 after Fed rate cut

Investors poured into tech stocks at one of the fastest clips of the year a day after the Federal Reserve cut its benchmark interest rate for the first time since 2020.

Led by a 7.4% gain in shares of Tesla and a 4% jump in Nvidia, the Nasdaq rose 2.5% on Thursday, its fourth-sharpest rally of 2024. The biggest gain of the year for the tech-heavy index was a 3% increase on Feb. 22.

Lower interest rates tend to benefit tech stocks because reduced borrowing costs and bond yields make risky bets more attractive. In addition to the central bank's half-point reduction, the Federal Open Market Committee indicated through its "dot plot" the equivalent of 50 more basis points of cuts by the end of the year, eventually coming down by 2 percentage points beyond Wednesday's move.

While the Nasdaq has been on a steady rise this year, powered by Nvidia and the enthusiasm around artificial intelligence, Thursday's rally pushed the benchmark to its highest since mid-July. The Nasdaq peaked at 18,647.45 on July 10, and it is now just 3.5% shy of that level, closing at 18,013.98.

Nvidia, whose processors are powering the generative AI boom and services such as OpenAI's ChatGPT, gained 4% on Thursday to $117.87. The shares are up about 138% for the year after more than tripling in 2023, though they are still 13% below their all-time high reached in June.

Nvidia counts on a relatively small group of customers — namely Microsoft, Meta, Alphabet, Amazon, Oracle and OpenAI — for an outsized amount of revenue because those are the companies either developing large language models, hosting big AI workloads or doing both. Any sign of slackening demand creates concern around Nvidia's stock.

But lower rates are seen as another potential boon.

Fellow