It was an ugly day yesterday for the chipmakers. NVDA plunged over 17% on the news that a Chinese company may be an AI chip competitor. NVDA declined almost $600 billion in capitalization, a decline that is more than the total value of GM and XOM combined. It was the largest drop in value for individual security on record by almost a factor of 2.5x. Ouch!
Nvidia at a $2.9 trillion market cap is no longer the most valuable company in the world, ceding that to Apple at $3.5 trillion. It may drop to the third largest company, behind MSFT, worth about $3.2 trillion.
Treasuries rallied nominally on a flight to quality.
At the time of this writing, the Dow is positive. Bloomberg writes this is the first time since 1999 that the S & P 500 has shed 1.5% or more but the Dow ended higher.
Over 300 S & P 500 companies advanced yesterday, underscoring the top heavy nature of the selloff.
Further referencing Bloomberg, the newswire opines even with the recent paring to curb their influence, the cohort of NVDA, AAPL, MSFT, AMZN, META and GOOG, these six companies still make up over 50% of the NASDAQ 100 and 33% of the S & P 500’s value.
NASDAQ’s decline yesterday was tempered by AAPL’s 3.9% advance.
Tomorrow MSFT, TSLA and META post earnings. AAPL releases on Thursday. Bloomberg writes the NASADQ 100 is trading at 27 times estimated forward earnings, which is significantly above its 10-year average of 22.
Valuations and ownership are near or at record highs and profit growth is projected to come in at the slowest pace in over two years, hence any misstep or negatively perceived news may be met violently.
A simple premise to make a company or sector to move higher is more buyers than sellers. Many are now questioning how can a $3 trillion company be viewed as growth company given that almost everyone owns the shares?
What will happen today?
Last night the foreign markets were up. London was up 0.47%, Paris up 0.40% and Frankfurt up 0.77%. China was down 0.06%, Japan down 1.39% and Hang Seng up 0.14%.
Futures are flat ahead of the start of the FOMC meeting and the eve of several high profile profit reports. The 10-year is off 11/32 to yield 4.57%.
