"Stock markets crashed globally yesterday and this morning, even though Nvidia, the world's most valuable company, delivered blowout, above-expectations earnings. The company's shares declined 3.15% yesterday. And the bloodletting continued for the red-hot semiconductor maker today: Nvidia was down another 3% by midmorning's trading. Still, the S&P 500 as a whole was flat by lunchtime, seemingly holding its own despite the storm in tech stocks. The Dow Jones Industrial Average was up."
"It's not just about a lot of negative headlines about AI. The context here is that Nvidia stock is up more than 31% year to date-nearly three times the gain of the S&P as a whole. So a lot of this selling looks like people who are quite rationally deciding to cash in some of those gains while they can."
"That perfectly understandable decision has a disproportionate impact: Because Nvidia and a handful of other tech stocks represent 40% of the valuation of the entire market, and 75% of its gains over the past three years, when Nvidia moves everyone else gets moved as well. Thus, it's likely some traders see selling in Nvidia as a signal to sell the S&P 500 as a whole."
Stock markets crashed globally even as Nvidia reported blowout, above-expectations earnings, with Nvidia shares falling about 3.15% yesterday and another 3% by midmorning. The S&P 500 remained roughly flat by lunchtime while the Dow rose. The immediate selling reflects profit-taking after Nvidia's roughly 31% year-to-date gain, with investors cashing in large gains. Nvidia and a few tech stocks account for about 40% of market valuation and 75% of gains over three years, so moves in Nvidia disproportionately affect indices. Major banks maintained bullish longer-term AI views, citing ongoing AI-driven capex that benefits Nvidia. The CME FedWatch showed previously split bets on a December pause, which would be negative for stocks because traders favor lower rates.
Read at Fortune
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