A Leader Turns Into a Loser and Drags Down the Market
The Magnificent Seven are no longer Magnificent.
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The two biggest losing stocks in the Nasdaq 100 QQQ on Tuesday were CrowdStrike CRWD and Nvidia NVDA, which lost 10% and 7%, respectively. CrowdStrike was a hot ticket with its security software, but a bug in its programming caused a disaster, and it now faces potential liability from companies such as Delta Air Lines DAL that relied on it.
Nvidia was the star of the show. It enjoyed absolute euphoria as artificial intelligence players could not buy enough of its AI chips. It had price targets as high as $200, and it briefly had one of the largest market capitalizations in the world.
Nothing much has changed at Nvidia, but the market is no longer in love with it. While AI may be the biggest technological advancement since the internet, it isn’t the windfall that many had hoped for. It requires major investment, there is significant competition, and the big payoff is years away.
Nvidia has now lost around $1 trillion in market capitalization and is struggling to find support levels. Thne stock has dragged down both the semiconductor sector and the Magnifence Seven group. Maybe it can bounce back, but it is going to be extremely difficult for it to regain major momentum.
While we wait for the next Nvidia earnings report, we first have to contend with Microsoft MSFT and other major AI players. There were some major worries on Tuesday in front of the report, which drove the Nasdaq 100 down 1.4% and was bad enough to weigh on other areas of the market. Breadth was close to flat — which isn’t bad — but buyers were not willing to chase the rotational action very much.
Microsoft earnings are out, and the initial reaction was very negative. Expectations have come down, but EPS of $2.95 just barely beats the $2.92 estimate, and revenue of $64.700 billion just snuck by the $64.357 billion estimate. There are worries about the cloud business, and we’ll see on the conference call if estimates come down.
Microsoft is dragging down the Nasdaq 100 after hours, which is down an additional 0.8%.
The Magnificent Seven are not so magnificent anymore.
Don’t forget we have the Fed Wednsday afternoon, which may be a catalyst for further rotational action. I’ll have more on that in the morning.
Have a good evening. I’ll see you Wednesday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
