A Short-Lived Nvidia Glory?

Nvidia’s shares have risen by 1000% since the end of 2022 due to the continuous demand for its AI chips. However, the company has lost almost 13% of its value in just three days.

Today, on Wall Street, most stocks saw a rise, but Nvidia experienced another decline as the hype around artificial intelligence (AI) seems to lessen.

On the New York Stock Exchange, despite the overall market being in the green, the day close was a mixed bag. The S&P 500 also fell slightly by 0.3%, from its peak the previous week. On the other hand, the Dow Jones Industrial Average increased by 260 points, or 0.7%. Regarding financial services stocks, JPMorgan Chase increased by 1.3%. Bank of America went up by 3%, and Wells Fargo went up by 1.6%, with the financial sector anticipating the results of the Federal Reserve’s stress tests.

However, there were losses in several high-profile stocks, especially Nvidia, which fell by 6.7%, amounting to the third successive drop. Nvidia’s shares have risen by 1000% since the end of 2022 due to the continuous demand for the company’s AI chips. This demand was enough to drive the US stock market to all-time highs even as the US economy slowed down due to high interest rates. However, the recent surge in AI stocks has brought about worries of a bubble in the market and high expectations from investors.

Nvidia, which briefly overtook Microsoft to become the most valuable company on Wall Street last week, has lost almost 13% of its value in just three days. Since Nvidia is one of the leading companies, its stock volatility significantly impacts the S&P 500 and other indexes. It was the biggest drag on the S&P 500 on Monday. Other companies that have benefited from the AI boom also witnessed a decline in their gains. For instance, Super Micro Computer's share fell by 8.6%, lowering its YTD gain to 190.9%.

This stock change is positive for the market, especially if it can stay close to the current high levels. Some market watchers have been worried because only a few corporations, such as Nvidia, have fuelled the majority of the S&P 500’s increase in recent months, and they would prefer to have more stocks participating in the market’s growth.

RXO Acquires Coyote Logistics, Stock Goes Up 23%

Other news includes shares of RXO rising by 23% after the company revealed that it had acquired the Coyote Logistics freight brokerage from UPS at a cost of nearly $1.03 billion. This deal is expected to rank RXO as the third largest in North America for brokered transportation. UPS, which acquired Coyote in 2015 for $1.8 billion, saw its stock rise by 1.5%.

Under Armour also grabbed attention; it first fell and rose by 2% after it decided to pay $434 million to settle a shareholder lawsuit over accounting and sales practices. While admitting no wrongdoing in the settlement, the company also agreed to non-entanglement of the chairman and CEO positions for at least three years.

In conclusion, the S&P 500 dropped by 16, thus dropping 75 points to close at 5,447.87. At the same time, the Dow Jones rose by 260,88 points to 38,411.21, but the Nasdaq fell by 192,54 points to 17,496.82.

Is the US Economy About to Take a Hit?

People are optimistic that falling inflation could prompt the Federal Reserve to cut rates later this year. The federal funds rate has been kept at its highest level in over two decades to slow down the economy and contain inflation.  

However, UBS economists think that the slowdown in the U.S. economy could be even worse than expected. They predict that growth will likely fall below 2% in the first half of 2024 from the current 3.1% growth expected at the end of 2023. This volatility in retail sales indicates that low-income consumers struggle with meeting their expenses.

Wall Street wants a recession to help ease inflation and force the Federal Reserve to cut rates. The Fed's most important task is to determine when to cut rates. If action is delayed too long, the economy may tip into a recession, but if rates are cut too soon, inflation may surge again.

Update: Nvidia Rebounds in a Pace Not Seen In Three Years

Nvidia’s stock jumped on Tuesday after the company’s shares had been under considerable pressure in the previous three trading sessions, which pulled the stock price into correction territory. The stock surged strongly yesterday, gaining 6.8% as the second best-performing stock in the S&P 500 index. The recovery happened after Nvidia’s share prices had dropped by 12, trading 9% lower in the previous three sessions. This rebound was significant as it was the first time since March 9, 2021, that the stock had risen by 6% or more after losing 6% or more the previous session.

Morgan Stanley published a new report which supported its positive stance on Nvidia based on a recent trip to Taiwan:

“Demand-side indications remain robust, with surprising demand still for H100, growing visibility for limited H200 ramp, Blackwell demand booked out through mid-next year, and a strong ramp of the H20 for the China market.”

However, he also noted that the demand is good while the supply chain is a bit of a mixed bag, which is typical for this point in Nvidia’s product cycle.

“We are, of course, aware that the stock has added nearly a trillion in market cap since earnings, so a good outlook is at least partly discounted — but we can report that the outlook does remain good,” he added.

Nvidia remains the biggest provider of training and inference technology. The survey revealed a clear preference for Nvidia's Hopper architecture GPUs, including the H100 and the H200, compared to the older and less advanced GPUs. Experts predict a major spike in demand for rack-scale systems, which are mainly applied for modelling.