On several occasions this year, I suggested we may be approaching a kind of market singularity wherein the US mega-caps regularly swing between quarter trillion-dollar single-session gains and losses, rendering the rest of the market irrelevant.
“The larger the mega-caps get, the more pronounced [the moves] are becoming, not necessarily in percentage terms, but in market-cap terms,” I wrote three months ago, in the course of noting that if it gets to the point where the mega-caps routinely add or shed half a trillion in market cap, “everything else [will be] more or less meaningless in a lot of important respects.”
Suffice to say we’ve reached that point. Or at least it appears that way.
On Wednesday, Nvidia added almost $330 billion in market value, topping its own record from February by a cool ~$55 billion. This dynamic is spiraling that fast — fast enough that a company can top its own all-time record for single-day value creation by $55 billion just a few months later. Nvidia also boasts the third-largest one-day value gain in US market history, a $217 billion post-earnings bonanza on May 23.
Note that Nvidia suffered a near $200 billion wipeout on July 30, which is to say on Tuesday, the day before rallying $327 billion.
Take a moment to consider that chart: Look how many of these kind of days Nvidia has had. And those are just a few examples. The ones that stuck out, so to speak.
This is completely silly, for lack of a better word, and it speaks to the risk I’ve warned on repeatedly: We’re fast approaching the threshold beyond which things get really (really) weird. There’s something existential about a scenario where the value of companies oscillates by $330 billion in a six-hour period. Jensen Huang made nearly $12 billion on paper Wednesday.
I agree, it’s troubling. I’m mostly out of the market while my career personal finances are collapsing — and it’s looking like the last of my investment accounts are going to be gone soon anyway to put food on the table — but if not, I wouldn’t touch this with a 10 foot pole. Like a lot of geeks, I started out in crypto, and eventually moved to the conventional market because I came to believe it was gambling, mostly because it behaved like this, divorced from any fundamentals. At this point, with things gyrating like this, any outlook essentially comes down to faith. And faith is a word for bullishness without certainty (in all areas, not Justin finance). And we know what the market eventually does with uncertainty.
Part of my evolution as a trader was to learn not to FOMO, and even if I was in the market right now, it might be a little tough to watch all this money being made by people who timed it perfectly, but I think I would mostly be content to sit on the sidelines here… I just don’t have enough faith in my own ability to analyze business fundamentals to say that I’d feel good about riding this out. I don’t even know myself if fundamentals support even the bottom of the range it’s swinging around in. So I’d need a lot more information from someone whose insight I trusted a whole lot to get involved with this. Maybe I’d have a little tiny bit of YOLO money in NVDA… No more than I would put into crypto.
YMMV, especially if you’re a more astute market reader or business analyst than I am.