--- title: "The Fed's interest rate cut has landed, how will tech giants perform?" description: "At 00:00 Beijing time on September 19, the Federal Reserve's decision to cut interest rates arrived as expected by the market. This time, the Fed cut rates by 50 basis points instead of the 25 basis p" type: "topic" locale: "en" url: "https://longbridge.com/en/topics/23956948.md" published_at: "2024-09-19T10:18:36.000Z" author: "[岂可修62](https://longbridge.com/en/profiles/9797828)" --- # The Fed's interest rate cut has landed, how will tech giants perform? At 00:00 Beijing time on September 19, the Federal Reserve's decision to cut interest rates arrived as expected by the market. This time, the Fed cut rates by 50 basis points instead of the 25 basis points previously anticipated by some institutions, leaving the market feeling the Fed's unpredictability. The Fed provided a detailed explanation for the rate cut. The Fed stated that recent macroeconomic indicators suggest economic activity continues to expand at a solid pace. Job growth has slowed, and the unemployment rate has risen but remains low. Inflation has moved closer to the Committee's 2% target but is still somewhat elevated. The Committee seeks to achieve maximum employment and 2% inflation over the long term. The Committee's confidence in inflation moving sustainably toward 2% has increased, and it judges that the risks to achieving its employment and inflation goals are broadly balanced. The economic outlook is uncertain, and the Committee acknowledges risks to its dual mandate. In light of progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 0.5 percentage points to 4.75% to 5%. When considering further adjustments to the target range, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. The Committee remains strongly committed to supporting maximum employment and returning inflation to its 2% target. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. Should risks emerge that could impede the Committee's goals, it stands ready to adjust the monetary policy stance as appropriate. The Committee's assessments will take into account a wide range of information, including labor market conditions, inflation pressures and expectations, and financial and international developments. Voting for the monetary policy decision were Chair Jerome Powell, Vice Chair John Williams, Thomas Barkin, Michael Barr, Raphael Bostic, Lisa Cook, Mary Daly, Beth M. Hammack, Philip Jefferson, Adriana Kugler, and Christopher Waller. Michelle Bowman dissented, preferring a 25-basis-point cut at this meeting. This rate cut is less a response to recent inflation and macroeconomic data and more a reflection of the "inevitable trend" driven by various data points. Some argue that certain U.S. macroeconomic data is currently inaccurate, with Wall Street influencing the Fed to open the door to rate cuts. In reality, the market is not as optimistic as the macroeconomic data suggests. Despite these conflicting views, the Fed's rate cut is now a done deal. A market with lower capital returns may further stimulate investment and financing, laying some groundwork for a "soft landing" of the U.S. economy. In fact, due to the Fed's rate hike cycle since 2022, the market is highly sensitive to macro-level interest rate actions. Although analysts had been optimistic about Fed rate cuts as early as the second half of 2023, this round of cuts did not begin in June as expected but was delayed by three months before the Fed officially started cutting rates. However, the Fed is well aware that this compromise may mark the beginning of a new economic cycle. Similar actions in the past have often been followed by economic fluctuations. While the Fed repeatedly emphasizes a "soft landing" for the U.S. economy, many market participants remain concerned about the current U.S. situation. As 2024 is a U.S. election year, the drama that began early in the year has been full of twists and turns—from Biden vs. Trump to Trump's assassination attempt, Biden's withdrawal, and Harris stepping in with her identity as a woman, a person of color, and a younger candidate. All this will reach its climax and conclusion in October. From the Fed's perspective, it typically avoids major moves in an election year, but this 50-basis-point cut reflects its concerns about the current market environment. Notably, Powell emphasized that the 50bp cut should not be extrapolated as a new benchmark, stating that the neutral rate is significantly higher than pre-pandemic levels. The Fed also stressed that it sees no signs of recession and has not yet declared victory over inflation. The Fed acknowledged weakness in the labor market, hence the "unconventional" 50bp cut at the outset, but it is also trying to project an image of "leading the market without rushing." Market reactions show some success in safe-haven assets. In fact, a 50-basis-point cut is rare in the Fed's history. Over the past 30 years, it has happened only three times: in January 2001, September 2007, and March 2020. Looking at the Fed's rate cuts since the 1990s, such aggressive measures have only been taken in response to significant economic challenges: the dot-com bubble in 2001, the financial crisis in 2007, and the pandemic in 2020, all of which posed enormous challenges to the U.S. and global economies. However, apart from 2020 being an election year, the other two cuts occurred during periods of political stability. Different assets reacted differently to the Fed's rate cuts, with U.S. stocks and gold initially rising before falling. For U.S. tech stocks, which are crucial to the market, the AI wave continues. At least for now, AI, as the next-generation technological development, shows no signs of a bubble or its bursting. With the recent release of OpenAI's new O1 model, AI remains on a fast track of development, both in terms of new models and B2B applications. Oracle's recent earnings report showed growth exceeding market expectations. With AI's support, a new round of infrastructure development will materialize at an unprecedented pace. Thus, much like Cisco in the 1990s, NVIDIA remains the biggest beneficiary of this AI wave. In the short term, it is hard to see any competitor matching NVIDIA, especially after Intel's plan to spin off its chip manufacturing business. NVIDIA's algorithm and language moat lay the foundation for its long-term growth. As for other companies, Microsoft and Google are clear winners in this transformation. As developers of the most widely used large models, their strong positions in cloud and enterprise services suggest they, along with Oracle, will likely perform well. The same could apply to Amazon. Tesla's situation, however, is more complex. Its valuation remains high for a new energy vehicle company, but its energy storage, autonomous driving, and humanoid robot businesses are pioneering new frontiers. Apple's 2024 products are likely in a transitional phase, with the iPhone 16 serving as a testbed for Apple's AI products and the more advanced iPad Pro solidifying Apple's position as the premier hardware platform for AI services in the consumer market. Overall, after a brief period of volatility post-rate cut, the tech index's momentum remains formidable. $NVIDIA(NVDA.US) ### Related Stocks - [NVDA.US - NVIDIA](https://longbridge.com/en/quote/NVDA.US.md) --- > **Disclaimer**: This article is for reference only and does not constitute any investment advice.