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One in the field is not a warrior. Nvidia has called this into question. While almost all sectors of the US stock market retreated, a single report from the chip manufacturer lifted the entire S&P 500.
Dynamics of S&P 500 and technology sector
The broad index closed up 0.7%, the Nasdaq 100 gained twice as much, while the Dow Jones barely moved. As is often the case when demand for AI picks up, technology sucked the oxygen out of the rest of the market. Robinhood Markets acknowledges that the market is so obsessed with the theme of artificial intelligence that it seeks free cash flow without heeding the risks of rising Fed rates.
The world's most expensive company did not disappoint. Nvidia's earnings blew past forecasts, and management promised a revenue growth of 70% in the 2028 fiscal year—almost double the 45% analysts had expected. Bloomberg called the forecast "astonishing" and calculated a potential reevaluation of over $100 billion. JP Morgan went further, stating that even these figures are conservative. Demand, according to the bank, is "significantly higher" than the stated supply.
Dynamics of Nvidia's market capitalization
Shares of Nvidia skyrocketed nearly 9%, adding $442 billion to the company's market capitalization. This marks the second-largest one-day increase in market value in history, surpassed only by Microsoft's record from a month ago. With a valuation of around $5.5 trillion, Nvidia has firmly established itself as the largest company in the world. Nevertheless, as one issuer climbs higher, the entire market hangs by a thin thread.
The S&P 500 technology sector was the only one to close in the green. The remaining ten sectors all retreated synchronously. In fact, the entire broad stock index was supported by a handful of companies, joined by reporting firms CrowdStrike and Salesforce. The stocks of these issuers gained amid strong demand for AI solutions.
Such concentration does not please everyone. Bank of America maintains the lowest forecast on Wall Street for the S&P 500 at the end of the year at 7,100 points, which implies a 7.5% drop from current levels. The bank fears that the leverage fueled by AI-driven expectations, coupled with abnormally tight credit spreads, heralds a deterioration in the credit cycle. The average estimate from strategists in a Bloomberg survey is much more optimistic, standing at 7,901 points, nearly 3% above current levels and 11% above Bank of America's target.
However, one strong player on the field does not guarantee victory for the entire team. In my opinion, the question today is not whether Nvidia will stand firm, but what will happen to the stock market if the world's largest company stumbles.
Technically, on the daily chart, the S&P 500's exit from the range of 7,635-7,700 has allowed for the formation of long positions. A breakout through resistance levels of the pivot at 7,730 and fair value at 7,745 would provide grounds to increase those positions.
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