Nvidia's stock is surging. Here's how it tends to perform after interest-rate cuts.

By Emily Bary

Nvidia's stock historically has made dramatic moves in the year after initial Fed rate cuts, and it has outperformed the S&P 500 on average when looking at all rate cuts since its IPO

Chip stocks including Nvidia Corp.'s are among the leading S&P 500 gainers Thursday, on a strong day for technology names and especially artificial-intelligence plays.

Shares of Nvidia (NVDA) are up 5%, while other big gainers include shares of Advanced Micro Devices Inc. (AMD) (up 6.1%), Marvell Technology Inc. (MRVL) (up 5.5%%) and Broadcom Inc. (AVGO) (up 5.3%). The Nasdaq Composite Index COMP is ahead 2.8% and the PHLX Semiconductor Index SOX is up 5.3% as investors continue to digest the Federal Reserve's move to lower interest rates by 50 basis points and the potential implications of that for technology stocks moving forward.

Historically, Nvidia shares have done well after rate-cut announcements when looking out several months. On average, the stock has seen a 6.9% gain in the month after a rate cut, a 16.6% gain in the three months after, a 16.7% gain in the six months after and a 20.7% gain in the 12 months after, according to Dow Jones Market Data.

Read: Nvidia's stock has room to run - but analysts see more upside for 6 other chip makers

The one-year move is more dramatic when looking at only initial rate cuts from the Fed. There have been three such instances since Nvidia went public in 1999, and the stock has gained 118.4% on average when looking 12 months out across those instances.

Don't miss: Nvidia's stock picks up a new bull who says there's 'still room on this train'

Still, history shows that Nvidia's stock is capable of making a big downward move a year after an initial rate cut, as when it dropped 68.9% a year out from the Fed's September 2007 announcement.

The PHLX Semiconductor Index on the whole has also seen gains, on average, in the months following interest-rate cuts. The index has risen 1.6% on average after one month, 5.6% on average after three months, 4.2% on average after six months and 11.2% on average after 12 months, based on a Dow Jones Market Data review that begins in 1995.

When considering just initial rate cuts, there have been five such instances in that time period, and shares have risen 19.6% on average 12 months out. But one 133.9% gain following the September 1998 cut skews that average, and it's worth bearing in mind that the PHLX Semiconductor Index has only finished in positive territory in two of the five instances when looking 12 months out from first rate-cut announcements going back to 1995.

More from MarketWatch: Nvidia is expected to grow quickly through 2026. These companies may grow faster.

Nvidia shares and the PHLX Semiconductor Index have outperformed the S&P 500 SPX when looking at one-year periods going back to 1990. On average, the S&P 500 has gained 2.9% in the 12 months following cuts and has gained 3.2% in the 12 months following initial cuts.

Still, in the case of the S&P 500, the index has ended in positive territory 12 months out following 67.3% of overall rate cuts since 1990 and following three of the five initial rate cuts since then. The PHLX Semiconductor Index was more likely to see a loss than a gain in both instances, while Nvidia shares were more likely to see a loss than a gain when looking at overall cuts, but not in the case of the three initial cuts since its IPO.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-19-24 1303ET

Copyright (c) 2024 Dow Jones & Company, Inc.