Making sense of market moves
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It turns out that the S&P 500 is greater than a single stock after all.
Expectations for Nvidia and the rest of the key tech stocks that have been supercharged by AI over the past two years have gotten so high that they’re pretty much impossible to meet. Even though Nvidia doubled its revenue and profit over the last quarter and beat Wall Street expectations, investors still sent the stock tumbling, fearing that the firm’s stellar growth isn’t accelerating as fast as it once was.
The other shoe didn’t drop
Despite warnings that an Nvidia-induced contagion would send major indexes into a tailspin—which makes sense, considering the stock makes up over 6% of the S&P 500—the rest of the market is actually up today.
Investors’ resilience shows that tech stocks don’t have quite the grip on the market they did only a few short months ago. As the Federal Reserve looks increasingly likely to lower interest rates, investors have moved their money beyond tech, into investments like small-cap stocks and value picks.
For example, investors have drained $67 million from the largest AI thematic fund on the market, the Global X Robotics & Artificial Intelligence ETF, just this month. That’s the biggest outflow from the fund since April.
The trend largely follows what analysts are advising: Don’t put all your eggs in one Magnificent 7 basket.
“We recommend investors examine their AI exposure as they navigate tech volatility,” wrote UBS CIO of Americas Solita Marcelli in a note yesterday.
Marcelli continued to say that if you don’t have any tech in your portfolio, consider adding some exposure. But if you already are exposed to AI, don’t go overboard, and hedge your bets.
It’s not that tech isn’t still the big kahuna, but investors are starting to realize that the other 493 stocks in the S&P 500 can grow, too.—LB