Recently, Nvidia has experienced a slight correction. The Wall Street Journal stated that “if Nvidia’s stock price did not fall on Thursday and Friday, the S&P 500 index would have risen.”
In the AI boom, Nvidia, led by Huang Renxun, has seen its stock price soar by more than 162% this year, and its market value has surpassed 3.1 trillion US dollars, making it the most expensive stock in the S&P 500 index. However, although Nvidia’s performance is impressive, it does not reflect the overall optimism in the market, as other stocks in the S&P 500 have shown signs of divergence.
The Wall Street Journal pointed out that investors are starting to worry about the overreliance on Nvidia in the market. Nvidia accounted for one-third of the S&P 500 index’s gains this month before its pullback on Thursday, and 44% of the gains since the beginning of 2022. This means that the performance of the entire S&P 500 is almost solely dependent on Nvidia.
If chip demand weakens, the AI hype becomes a reality, or the market becomes saturated, the S&P 500 index will have to rely on the performance of other sectors, which are far less stable than Nvidia. Analyst James Mackintosh from the Wall Street Journal believes that investors buy cheap and popular index ETFs to diversify risks and spread them across many companies. However, they end up taking on a large amount of risk related to AI concept stocks that are closely tied to Nvidia.
If Nvidia stagnates, other market segments may accelerate their development, but if Nvidia performs poorly, the performance of other AI-driven stocks will also be less than ideal, and market gains will depend on “economically sensitive stocks” outside of large tech companies.
Analysis: Nvidia FOMO sentiment has passed, a 20% decline is expected
Despite Nvidia’s outstanding performance in the market, no one accurately predicts the growth trend of its future revenue. Whether it is Wall Street analysts or Nvidia executives, they have been continuously raising target prices this year. However, Nvidia experienced a slight correction last Thursday and Friday.
Kevin Dempter, an analyst at Renaissance Macro Research, said that Nvidia’s stock price soared last Thursday due to investors’ fear of missing out on the market (FOMO). However, buying pressure subsequently subsided, and the stock price fell below the previous day’s low, causing investor sentiment to shift from optimistic to pessimistic. This has resulted in investors who bought in the past two trading days being trapped.
Dempter emphasized that such a trend after a big rise is particularly important, and market sentiment is likely to fluctuate like a roller coaster in the future. He pointed out that Nvidia’s stock price also turned negative after a surge on March 8 and then corrected by 20% within a month. Judging from the extreme changes in market sentiment and the sudden reversal of trends, Dempter predicts that Nvidia will face more profit-taking selling pressure. If a similar 20% correction occurs again, it could pull the stock price back to around $110 in early June.
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