Nvidia's Report May Not Be Enough to Revive the Magnificent Seven
The question now is whether non-blowout numbers will trigger a correction in the struggling indexes.
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Corrective action picked up momentum on Wednesday as the market grew increasingly nervous in front of earnings from Nvidia NVDA. It didn’t help matters that Super Micro Computer SMCI, another high-flying AI name, sold off nearly 20% on accounting issues. SMCI broke out at around $350 in January, moved over $1,200 in March, and is now back under $450. It is a good illustration of how the AI sector has grown increasingly volatile.
A late bounce moved indexes off the lows of the day, but breadth was more than 2 to 1 negative, and there was plenty of bidless action. The senior indexes are still not far from recent highs, but it has been a struggle lately, and the problem of negative seasonality is not going to go away for another month or so.
Expectations for Nvidia to beat and raise were very high, but the question is how good of a report does it need to be to bring in some chasers and send the stock up to retest highs around $140.
As expected, the company beat on both revenues and EPS. It also increased guidance, but the numbers are not a blow-out and the stock is initially trading down on the report. The 50-day simple moving average around $120.50 is now in play. The Nasdaq 100 QQQ is down in sympathy and is making new lows of the day.
There will be much more information on the conference call, but it doesn’t look like Nvidia is going to lead a revival of the Magnificent Seven names. The more immediate question is whether it is going to trigger a correction in the indexes if it fails to attract some new buyers.
I’m extremely cautious right now and do not plan to rush to buy pullbacks.
Have a good evening. I’ll see you Thursday.
At the time of publication, Rev Shark was long NVDA.
