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.
"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."
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