Tech Stocks Lead Nasdaq to New Highs as FOMC Minutes Loom, Rate Cut Expectations Repriced

On Wednesday, the U.S. stock market saw another strong performance, with the Nasdaq Composite Index reaching a new all-time high, propelled by a collective rally in tech giants. Wall Street's attention is rapidly shifting to the upcoming release of the Federal Reserve's meeting minutes, as the repricing of rate cut expectations becomes a core variable influencing U.S. equity valuation logic.

Tech Giants Lead, Nasdaq Hits New Highs

During today's trading session, heavyweight tech stocks like Nvidia (NVDA) and Apple (AAPL) stood out. According to market data, Nvidia's stock extended its recent gains, continuing to benefit from the explosive demand for AI chips. Apple, driven by expectations of growth in its services business and a new product cycle, saw its shares approach all-time highs. Additionally, other giants like Microsoft (MSFT) and Alphabet (GOOGL) also recorded significant gains, collectively pushing the Nasdaq past previous resistance levels to close at a new high.

Analysts point out that the current rally in tech stocks is not purely sentiment-driven. From a fundamental perspective, capital expenditure expectations in the AI supply chain, steady growth in cloud computing, and marginal improvements in consumer electronics demand provide solid earnings support for these companies. However, with valuations already at historically high percentiles, the market's sensitivity to the interest rate path is increasing.

FOMC Minutes Loom, Rate Cut Expectations Face Repricing

The Federal Reserve is set to release the minutes of its latest monetary policy meeting early Thursday Beijing time. Markets broadly expect these minutes to reveal detailed discussions among policymakers on inflation trends, the labor market, and the economic outlook. Previously, several Fed officials have made hawkish remarks, emphasizing that policy should not be eased prematurely until inflation clearly falls back to the 2% target.

According to data from the CME FedWatch Tool, the market's probability of a rate cut in September has fallen from over 70% to around 50%. This revision in expectations is directly reflected in the U.S. Treasury yield curve: yields on both the 2-year and 10-year notes have risen recently, posing potential pressure on high-valuation tech stocks. Investors are closely watching whether the minutes contain more clues about the "neutral rate" or the "degree of policy restrictiveness," as such language will directly influence market judgments on the timing and magnitude of rate cuts.

Valuation Logic: How Does a Delayed Rate Cut Affect Tech Stocks?

Tech stocks, especially high-growth AI-related names, are highly sensitive to interest rate changes. Under the DCF (Discounted Cash Flow) model framework, the present value of future cash flows is inversely related to the discount rate. If expectations for rate cuts are delayed, it implies a higher discount rate, theoretically compressing the valuation premium of these stocks.

However, the current market presents a pattern of "earnings growth offsetting interest rate pressure." For example, Nvidia's latest quarterly revenue grew over 200% year-over-year, far exceeding expectations, with strong earnings growth sufficient to offset the valuation drag from rising rates. Apple, with its massive user base and stable services revenue, exhibits stronger defensive properties. Therefore, even if the timing of rate cuts is postponed, as long as corporate earnings remain resilient, the structural rally in tech stocks could continue.

But risks cannot be ignored. If the Fed minutes signal a more hawkish stance—for instance, hinting at no rate cuts this year or raising inflation forecasts—the market could quickly undergo a round of "repricing," leading to a short-term pullback in tech stocks. Such volatility is not uncommon in history; for example, after the July 2023 FOMC meeting, hawkish language triggered a single-day drop of over 2% in the market.

Outlook: Focus on Minutes Wording and Earnings Validation

Looking ahead, the trajectory of the U.S. tech sector will depend on two key variables: the Fed's policy path and the sustainability of corporate earnings. In the short term, the wording of the FOMC minutes will serve as a barometer for market sentiment. If the minutes show policymakers are more confident about inflation receding or mention "risks of overtightening," it could boost rate cut expectations and drive tech stocks higher. Conversely, if they emphasize "inflation stickiness" or "tight labor market conditions," it could trigger profit-taking.

In the medium to long term, investors need to focus on the upcoming earnings season for quantitative guidance from tech giants on returns from AI investments. Only sustained earnings growth that exceeds expectations can support current high valuation levels. Additionally, geopolitical risks and uncertainties surrounding the U.S. election could exacerbate market volatility.

Risk Warning

The above content is for reference only and does not constitute investment advice. Markets involve risks; invest with caution. Any analysis, views, or data mentioned in this article are based on publicly available information, and their accuracy or completeness is not guaranteed. Investors should make independent decisions based on their own risk tolerance.