This Week in Financial Markets: 2.24.2024

1. Nvidia!

BOOM. This week - Nvidia had the largest 1-day gain (in market-cap terms) in the HISTORY of the stock market. In the process, the stock’s market-cap surpassed the size of the entire Canadian economy (!).

Real GDP for Canada was $1.74 trillion (USD) as of 3Q. Thursday’s spike brought Nvidia’s market capitalization to over $1.9 trillion…

*NVIDIA 4Q REV. $22.1B, EST. $20.41B
*NVIDIA 4Q ADJ GROSS MARGIN 76.7%, EST. 75.4%

For the most part, Nvidia’s stock surge has been backed-up by insane results. They continue to crush estimates every single quarter (namely since ChatGPT’s release).

2. Signs of Euphoria

The hype that has built-up in AI is historic. If you needed another reminder that Wall Street is a sales business… over 1/3 of S&P 500 companies are mentioning “AI” on their quarterly earnings calls.

Some pretty stark signs of euphoria are piling-up. Super-Micro Computer (SMCI) has nearly quintupled just this year. Importantly, speculation (via call option buying) has super-charged this move.

The market cap concentration of the top 10% of stocks has hit its highest level since 1929, surpassing the year 2000. Meanwhile, the price to earnings gap for big tech is the widest since the dot com bubble. However, that gap can get much wider if the dot-com bubble is any proxy… Is the bubble just beginning?

Investors are not ready for this. Global exports are picking up. Recent reports from South Korea, Japan, and Taiwan show a continued trend of rebounding exports. Data from these countries are typically good indications of what will happen more globally. This is suggesting we will see a pickup in the global goods demand. Meanwhile, investors are still trying to predict when the Fed will cut rates based off when a recession is coming. What if the next move is a hike?