The Entire World is Relying On 1 Stock

Nvidia fever has swept the world.

On NVIDIA earnings release day (February 21, 2024), the entire stock market, nay the entire world economy seemed to hinge on the performance of this one stock.

How did we get here and what is going on?

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So what the hell happened?

This used to be a gaming company that made chips for rich gamers to crank up the graphics on cyberpunk, how is this the most important company in the world now?

I’m going to break down what these earnings mean and explain the risks and challenges going forward as we rely on fewer and fewer tech companies to power all of our global economic growth.

Buckle up, this one is special.

A quick recap, in the last quarter of 23 we saw six companies (the Magnificient Seven minus Tesla produce all of the growth in the US stock market.

The other 494 (of the S&P 500) were down.

So while we could technically say that the market (and everybody's retirement) was slightly up, it's all because of six companies.

Of those six companies, only two are doing really well now.

The dynamic duo in 2024 is Nvidia and Microsoft, with Nvidia alone account for a third of all growth seen in the S&P 500 this year!

Basically over half of all of the growth in the top 500 companies came from these two alone.

We are in almost never-before-seen levels of lack of breadth in the market.

We have very few companies dictating all the moves in the market.

The last times this happened were around the dotcom bubble and 1929.

Again, I'm not saying we're in the same situation but I am saying that the level of concentration is frightening.

Goldman Sachs even called Nvidia ‘The most important stock on Earth’ before its earnings release.

I bet my dotcom bubble and 1929 comparisons don’t sound so crazy now huh?

As Nvidia announced its earnings, there was widespread fear that if they missed on earnings, the stock would have tanked dragging everything down with it.

So a lot was riding on that announcement, it was called “The AI trade’s moment of truth” and “The most crowded trade on Earth”.

As a reminder, in the past few months, everybody and their grandma have swarmed into Nvidia, putting in their savings making it the most traded stock on Wall Street surpassing Tesla.

So there was a lot writing on that announcement and even I tuned in, as did the world.

Well… What happened?

When Jensen Hong took the call and announced what Nvidia was doing, guess what they did?

They only went at pulled it off!

Somehow, against all odds and insane expectations, yet again this leather jacket wearing king pulled another rabbit out of the metaphorical earnings hat and saved the market for a little while.

That was a lot to take in, so I’ll leave at that for tomorrow when I break down exactly why the entire world is so obsessed with this company.