Nvidia's record loss on Monday highlights significant shifts in the financial landscape, akin to ancient mythology's ouroboros, a symbol of self-cannibalism. The article posits that Big Tech is increasingly investing in itself, which undermines returns. This correction reflects a market realization of these dynamics, as evidenced by the disparity in valuation between Big Tech companies, known as the Magnificent 7, and the broader market. Currently, the Magnificent 7 represent over 30% of the S&P 500’s market capitalization, a stark increase from a decade ago, raising questions about sustainable growth.
Like the ouroboros, I believe Big Tech is eating itself alive with its component companies throwing more and more cash at investments in each other that are most likely to generate less and less of a return.
Even after Monday's dip, the disjunction in valuations between Big Tech... and the rest of the stock market remains staggering.
The Magnificent 7 still constitute more than 30 percent of the market capitalization of the S&P 500 (up from just under 10 percent a decade ago).
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