Why Nvidia’s post-earnings dip is actually good news for stocks

VaselineAugust 29, 2024

0 2 minutes read

Why Nvidia’s post-earnings dip is actually good news for stocks

Nvidia - Why Nvidia's post-earnings drop is actually good news for stocks

Source: Michael Vi / Shutterstock.com

Today, stocks are hitting new highs. Although, that’s not necessarily news; it happens all year round. But I would say that today is much more than an average “good day” on Wall Street. Actually, this could be the best street day of 2024.

Now, that’s not because the stock is posting its biggest gains to date; they are not. The S&P 500 it’s up 0.7%, which — while good — isn’t even the biggest daily gain of August.

So why do we think today is the best day for stocks this year?

Because they are growing – even like Nvidia (NVDA), the market’s most important stock, is declining.

Nvidia’s titanic delivers great earnings, but investors aren’t happy

Last night, AI chipmaker Nvidia reported strong quarterly earnings. Revenue grew 122%, with data center revenue growing over 150%. Profits increased by almost 170%. On the company’s conference call, management sounded very optimistic about growing demand for AI chips in data centers, businesses adopting AI to increase productivity, even car companies making huge strides in self-driving thanks to AI advances .

It was a very healthy earnings report that also confirmed the underlying strength of the AI Boom.

However, in response, Nvidia shares are down today as some investors expected even more from the chipmaker.

Ordinarily, a further decline in earnings in NVDA would drag down the rest of the market, as it has been heavily dependent on the tech titan this year. But that is not happening today.

NVDA stock is down. Markets are rising – by quite a bit.

It’s very important… and very optimistic.

Of course, it is never healthy to have a stock market that relies too much on certain stocks. Healthy markets are those with broad participation – not narrow leadership.

So far in 2024, we have had a market with a narrow leader. AI stocks, led by NVDA, rose throughout the year. The rest of the market struggled.

But now that is starting to change.

From January to June, Global X Artificial Intelligence ETF (AIQ) rose about 15%, while small-caps Russell 2000 it was practically flat. Since the start of July, however, the AIQ ETF is down about 2%, while the Russell 2000 is up nearly 10%.

The rest of the market is starting to join the party. And this has extremely optimistic implications.

The Final Word

We expect that as the Fed cuts interest rates, the economy strengthens, and the AI boom continues with vigor, the current market rally will increase further over the next few months.

This expansion should set the stage for sustained market gains throughout 2025 – possibly even into 2026.

That’s why we think today was the best day of 2024 on Wall Street so far. It confirmed to us that the market’s narrow rally is poised to widen in a big way, benefiting all stocks – not just a select few.

That’s why we’re not addressing NVDA’s actions right now. But us i am hitting the table on a variety of others. And we think they have a lot more potential to offer in the next few months.

Check out some of the stocks we’re actively recommending right now.

_{As of the date of publication, Luke Lango did not hold (either directly or indirectly) any position in the securities mentioned in this article.}

PS You can stay up to date with Luke’s latest market analysis by reading our daily notes! Check out the latest issue on your Investor in innovation or Early stage investor the subscriber’s website.

VaselineAugust 29, 2024

0 2 minutes read

Vaseline

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