Nvidia overtakes Microsoft to become most valuable company

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Nvidia reclaims the crown
On Tuesday, Nvidia surpassed Microsoft to become the world's most valuable public company with a market cap of $3.34 trillion. The feat comes after its stock price surged a remarkable 170% this year and more than ninefold since the end of 2022, driven by a boom in generative artificial intelligence. Nvidia has an 80% share of the data center AI chip market as Microsoft, Apple, Alphabet and Amazon buy up the processors needed to power AI models.

another record high
The S&P 500 edged its way to another record high, as Nvidia surpassed Microsoft as the world's most valuable company. The Nasdaq Composite ended the day in positive territory. The Dow Jones Industrial Average gained a modest 56 points. Retail sales in May raised concerns about the world's largest economy, while U.S. oil prices rose for a second day. The yield on the 10-year Treasury fell.

under fire
Boeing CEO Dave Calhoun faced sharp criticism from a Senate panel over the company's safety issues, whistleblower complaints and his compensation. Senator Josh Hawley accused Calhoun and Boeing of hurting the company by “taking it short” and criticized his $33 million compensation package. “Frankly sir, I think it's an irony that you're still on the job,” Hawley said. Calhoun defended Boeing's efforts to improve manufacturing quality and safety after a recent mid-air door panel incident.

Slow growth in sales
Retail spending in the US grew by just 0.1% in May, below expectations. The sluggish growth, along with the drop in April's data, suggests a slowdown in consumer spending. Spending accounts for two-thirds of economic activity, so investors expect any weakness to prompt the Federal Reserve to lower interest rates to boost growth. Markets are expecting a rate cut at least twice this year, while Fed officials have indicated that a rate cut is likely only once.

Buffet Oil
Warren Buffett's Berkshire Hathaway has steadily increased its stake in Occidental Petroleum. Filings show that from June 5 to June 17, the conglomerate bought 7.3 million shares at prices below $60. It now owns more than 255 million shares, representing a 28.8% stake in Occidental, making it the largest institutional investor. Berkshire also owns preferred stock and warrants in the oil company, with a potential future ownership of more than 40%. Buffett has said he has no plans to take full control despite receiving regulatory approval to buy up to a 50% stake in the oil company.

[PRO] nvidia rebalancing
The S&P 500's rebalancing on Friday, which is typically overlooked, is garnering significant attention because of Nvidia's meteoric rise. The change presents challenges for tech-focused ETFs and could impact their holdings of giants like Nvidia, Microsoft and Apple. Here's what it means for investors.

The Federal Reserve has signaled one possible rate cut by the end of the year, while investors expect two cuts, according to CME's Fed Watch tool.

Investors are trying to catch any data that shows weakness in the economy and might prompt the Fed to cut rates again. The latest retail data show that consumer spending, which accounts for about two-thirds of economic activity, barely rose in May. Take away autos and it actually fell.

“Perhaps households are not as impervious to higher interest rates as we had been led to believe. Of course, we do not expect a complete collapse in consumption, but even a modest slowdown in consumption growth could be enough to sway a balanced Fed in favor of cutting interest rates in September,” Paul Ashworth, chief North America economist at Capital Economics, said in a message to investors.

Boston Federal Reserve President Susan Collins expressed cautious optimism about recent inflation data.

“It is too early to determine whether inflation will return to the 2% target. Uncertainty is still very high, and volatility of monthly data remains high, including for inflation,” commented Collins in Lawrence, Massachusetts. “We should not overreact to a month or two of promising news, just as it was not appropriate to take too much cue from disappointing data earlier this year.”

Federal Reserve Governor Adriana Kugler hinted at the possibility of cutting interest rates later this year.

“If the economy evolves as I expect, it would be appropriate to ease policy later this year,” said Kugler at the Peterson Institute for International Economics in Washington.

Waiting too long to cut interest rates could stall the economy as consumers tighten their belts. As CNBC's Jeff Cox writes, the Fed risks sliding into a contraction if it doesn't cut rates now. Cox cites economist Claudia Sahm, who has formulated a time-tested rule that indicates when a recession is likely.

Wall Street is fully aware of this risk. While the S&P 500 hit another record high, its gains have been modest in recent sessions. Nvidia also took the top spot as the most valuable company with Tuesday's high. Nvidia's rapid rise could continue as tech-heavy ETFs are buying billions of dollars worth of shares to rebalance their portfolios.

, CNBC's Jeff Cox, Kiff Leswing, Bob Pisani, Leslie Josephs, Alex Herring, Samantha Subin, Spencer Kimball and Yun Lee contributed to this report.