2023’s Market Winners and Losers
2023 proved to be a dynamic and tumultuous year for the global markets and economies. A confluence of factors, including inflationary pressures, looming recession concerns, and heightened geopolitical tensions and conflicts in the Middle East, Russia, and Ukraine, collectively contributed to significant volatility across diverse market sectors.
Accordingly, while some sectors suffered, others soared in the face of these hurdles. Here are 2023’s winners and losers from diverse market sectors:
The Winners
Artificial Intelligence’s Leaders
Artificial Intelligence (AI) has made notable buzz in 2023, especially in light of OpenAI’s revolutionary chatbot, ChatGPT, and with some of the biggest tech companies spending efforts into the advancement of AI.
While many companies participated in the AI field, some of the most prominent names this year were NVIDIA, C3.AI, and Microsoft.
NVIDIA (NVDA)
Among some of 2023’s biggest winners is American tech giant and chip leader, NVIDIA (NVDA), which hit record highs, exceeded expectations in its earnings releases, soared past $500 at a certain point, and gained over 245.9% from the start of the year until December 31. (Source: Forbes)
This is because, for many years, NVIDIA has established itself at the forefront of the AI industry as it created chips and software that conduct complex AI processes as well as specializing in selling AI building blocks for the development of AI infrastructure.
NVIDIA's graphics processing units (GPUs) and the introduction of CUDA software back in 2006 can also conduct advanced AI functions and are considered compatible with AI workloads.
Notably, NVIDIA has engineered dedicated chips such as the H100, specifically designed to efficiently manage transformer operations, forming the fundamental basis for services like ChatGPT.
NVIDIA's remarkable growth is often attributed to its expansive data center business, the largest revenue segment for the tech giant. This success is mainly fueled by generative AI, and to many people, the company has become synonymous with AI.
Furthermore, NVIDIA's venture into the AI domain is expected to persist into 2024, following the revelation by NVIDIA of an enhanced iteration of its AI computing platform, the HGX H200, slated for deployment by major cloud infrastructure services in the same year.
Nonetheless, with so much rising competition from companies like rival AMD (AMD), for example, it is imperative to keep in mind the fact that NVIDIA’s trajectory is yet to be determined.
C3.AI (AI)
As the name implies, C3.AI (AI) experienced a 158.5% surge from the beginning of 2023 until December 31, primarily driven by AI with a few drops here and there.
C3.AI is a California-based software-as-service (SaaS) company that specializes in the provision of AI software to enterprises.
The company has established itself as a trailblazer in the AI industry, earning recognition and widespread adoption among major corporations, including industry giants like Alphabet (GOOG), with whom it became a partner.
Notably, the company's leadership shifted focus from short-term revenue to transaction-based pricing, expanding the customer base for promising long-term revenue results and many analysts believe that C3.AI’s future may even be brighter.
Microsoft (MSFT)
Despite having suffered slightly at the beginning of the year when it had to lay off workers in light of rising inflation and economic struggles, Microsoft (MSFT) gained about 56.9% from the start of the year up until December 31.
This may be attributed to the fact that the Silicon Valley tech behemoth has significantly dedicated resources to propel the field of artificial intelligence in 2023.
Its substantial contributions are evident across various avenues, with a notable focus on its investments in OpenAI's technology and through its integration into Bing, Microsoft 365, Github, and its suite of workplace productivity tools among other platforms.
As such, it may not come as a surprise to learn that some market experts like Ivan Feinseth, an analyst from Tigress Financial believe that Microsoft is at the “forefront of the AI revolution” and is “driven by its continued integration of increasing AI functionality, incorporating ChatGPT across all aspects of its business and product lines, which will accelerate the digital global transformation and highlight the stock’s investment opportunity.”
It might be interesting to see how these efforts will also affect the company’s growth in the months to come.
More Winners: Gold (XAU)Shines
In addition to the mentioned stocks, this year was a stellar one for Gold (XAU) one of the most precious commodities in the world as it gained about 12.1% since the start of 2023 up until December 31.
It appears that the global uncertainties from wars to the Big Banks’ crisis and hopes of a dovish Fed rate have made Gold prices more precious and some analysts believe that this solid performance might continue in 2024. (Source: Reuters)
The Losers
As previously mentioned, this year had its ups and downs as many economic woes took a toll on the global economies.
Among the markets and financial instruments that suffered notable losses were Big Banks, Natural Gas, and Wheat.
Big Banks’ Crisis
Big Banks have undoubtedly weathered a turbulent year marked by significant volatility and notable declines. As such, several leading names within the banking industry faced financial turmoil, experiencing bankruptcy and substantial losses in market value.
These drops were the result of a confluence of factors, including a weakened economic landscape, persistent inflation, and recessionary pressures.
To combat these challenges, Central Banks like the Federal Reserve responded by implementing hawkish interest rate hikes, inadvertently triggering liquidity issues for many banks.
Consequently, this was exacerbated by the fact that a considerable number of these institutions had invested heavily in long-term US bonds, which subsequently depreciated in value due to the elevated interest rates.
For example, a pivotal event in the less-than-rosy landscape of the banking sector unfolded in March when Silicon Valley Bank (SVB) went bankrupt. This fallout was deemed the second-largest banking crisis in the US since the 2008 financial crisis.
Accordingly, the aftermath of SVB's collapse reverberated throughout the industry, adversely affecting other major banks.
Notably, rivals such as Swiss banks, UBS (UBSG.VX) and Credit Suisse became partners. In a bid to stave off bankruptcy, UBS acquired its competitor, Credit Suisse.
With the Fed turning more dovish recently, it will be worth keeping tabs on banking stocks and Central Banks’ decisions to see what the banking sector could look like in 2024.
Commodities
Commodities were among this year’s losers with Natural Gas and Wheat making the biggest buzz on geopolitical tensions and uncertainties.
Natural Gas (NG)
Natural Gas (NG), a highly-demanded energy commodity lost over 37.6% since the start of the year and up till December 31, with the majority of the drops being in the beginning of 2023.
The decrease in Natural Gas prices can be linked to a convergence of elements that have redefined the market dynamics.
Initially, the upswing in prices reaching their highest point in 14 years in August 2022, triggered by Russia's reduction of gas supplies to Europe, transitioned into a swift decline of these gains in the latter part of 2022 and early 2023.
Moreover, in Europe, there was a substantial decrease in Natural Gas demand, spurred by a change in behavior in response to excessively high prices and measures to enhance energy efficiency.
Additionally, the historically high storage levels in Europe, influenced by government policies and an exceptionally mild winter, conveyed a bearish signal to the market.
Nevertheless, the future of the market remains uncertain, with potential short-term price hikes contingent on factors such as a rebound in Natural Gas demand in Asia and unpredictable weather conditions.
Wheat (ZW)
Wheat (ZW) a very essential commodity also experienced a tumultuous year as it lost about 19.4% of its value since the beginning of 2023 up until December 31.
These losses may have stemmed from several factors, with a major influence coming from Russia's remarkable wheat harvest. The country's bumper crop has flooded the global market with wheat, causing prices to slide.
However, despite the ongoing tensions disrupting wheat exports from Ukraine, a significant player in global wheat trade, Russia's increased production has managed to fill the void and keep prices down.
As such, many speculative traders opened short positions on wheat. While this surplus has helped maintain stable prices, experts warn of the market's vulnerability, especially in the Black Sea region, where Russia heavily relies on exporting wheat.
Moreover, the uncertainty surrounding geopolitical tensions and the chance of unexpected global supply disruptions added complexity. It underscored the delicate balance between a price drop due to oversupply and the potential for a sudden reversal triggered by geopolitical events.
Only time will tell what the future holds for this indispensable commodity.
2024’s Economic Outlook: What Can Traders Expect in the New Year?
According to some analysts from Morgan Stanley (MS), the outlook for the stock market in 2024 suggests a subdued upward trend, with a predicted 2% rise in the S&P 500 (USA 500). They emphasize the persistence of "stock-specific risk," potentially maintaining an elevated level.
This forecast is set against the backdrop of anticipated weaker earnings reports and a robust economy. Investors are expected to divert their funds towards defensive stocks and sectors such as industrials and energy.
Traders and analysts will have to wait and see what the new year will actually look like.
Conclusion
In 2023, global markets saw winners like NVIDIA and Microsoft riding the AI wave, while Gold shone amidst uncertainty.
On the flip side, Big Banks faced a crisis, and commodities like Natural Gas and Wheat took hits. Traders, consumers, and analysts will need to wait and see what 2024 has in store.
