Wednesday was Nvidia day in the US.

On the off chance you’re just coming out of a two-year coma, first, welcome back. Second, Nvidia’s a big deal. The biggest deal. “The most important stock on planet Earth,” as Goldman’s Scott Rubner put it.

That kind of hype, true as it most assuredly is, makes me cringe. Something about planning my day around an earnings report from a company which, until very recently, was famous for video game graphics, is unpalatable. (I despise video games and anything to do with them.)

Alas, the future of the world now turns on the company’s outlook. So does the entire stock market. And it’s not just the eye-watering statistics everyone spent the last 48 hours reciting, although that’s obviously a big part of it.

In a brief Wednesday note, Nomura’s Charlie McElligott did a good job of tying it all together. “Why does this one stock seemingly matter so much?” he asked, noting that NVDA “has now become a ‘macro factor’ with regard to [both] sentiment and positioning.”

For one thing, Nvidia’s nearly 28% of the index’s YTD return attribution. So there’s that. “But bigger picture, NVDA is the poster child of the AI / mega-cap tech boom [since] last summer, whose halo effect has almost single-handedly held up US equities,” McElligott wrote, on the way to explaining how a narrow market has contributed to the death of volatility. The figures below give you a hint.

“Th[e] lack of breadth — with the Magnificent 7 phenomenon seeing such a small group of names driving nearly the entirety of returns — has meant a market with clearly delineated sector-, thematic-, and factor- bifurcation and performance attribution, which is the primary reason why three-month SPX realized correlation has recently been destroyed down to 5.5-year lows,” Charlie wrote, explaining the table and accompanying chart.

Collapsing correlation can (and does) suppress index-level volatility. I’ve been over that dynamic again and again. In August of 2020, for example, I walked through the very same phenomenon on the way to quoting SocGen’s equity derivatives team which summed it up in just eight words: “A tech bubble can drive equity volatility lower.” Here we are three and half years later with the same tech bubble (I guess it’s actually a different tech bubble, just with the same names plus Nvidia) and the same low vol.

“Hence the hopes and dreams (and perhaps ‘siren song’) for the ‘long vol’ crowd that NVDA earnings somehow ‘shock-out’ the consensus dynamics and positioning,” McElligott went on. The issue headed in, he said, was that “the singles fundamental space” viewed the guide as “beatable.” “So this all comes down to the trajectory of expectations versus reality, and whether whispers got ahead of themselves, especially in the minds of recent buyers of the all-time highs.”

Suffice to say Nvidia cleared the bar, both relative to consensus and in the minds of buyers, “recent” and otherwise.