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Nvidia (NASDAQ:NVDA) is sparking broader market chatter after extending its recent losing streak to enter correction territory on Monday. The high-flying stock lost $500B in market cap over the past several sessions, retreating to third place – behind Apple (AAPL) and Microsoft (MSFT) – in the rankings of the most valuable companies on the planet. It’s still up 140% YTD, making it the second-best performer in the S&P 500 Index (SP500) behind Super Micro Computer (SMCI), which has nearly tripled in 2024.
Sector rotation? Stocks rose outside of big technology names on Monday, with gains seen in nine of the 11 sectors of the S&P 500. Given weightings and concentration, the benchmark index ended the session lower, as well as the Nasdaq Composite (COMP:IND), while the Dow Jones Industrial Average (DJI) tacked on 260 points, led by energy and financials. The value vs. growth equation comes ahead of May’s personal consumption expenditure data, the Fed’s favorite inflation gauge, which is set to be released on Friday.
A rotation could be healthy, especially for those concerned about concentration risk or overstretched valuations. It could also help sustain the current rally, which is predicated on a soft landing and Fed easing cycle, and boost other sectors that haven’t seen significant appreciation this year. While a pause may be warranted, don’t immediately dismiss the staying power of tech, as well as the enthusiasm surrounding artificial intelligence and accompanying corporate profits.
SA commentary: “This isn’t the tech bubble all over again because the firms causing the tech boom are not just speculative wishful thinking. They are the most profitable entities that have ever existed,” writes SA analyst Cullen Roche. All that said, the rate of change is worrisome. The valuations are worrisome [but] the fundamentals very much support their high valuations. We need to bring time back into perspective here.”
