The stock market, which has been largely driven by the artificial intelligence (AI) sector, saw a significant shift on Friday NVIDIA Corp NVDA make way. Nvidia’s stock reversal sparked concerns about a broader market downturn.
What happened: Nvidia, a major AI player, fell 5.5% on Friday, marking its worst session since late May. This decline, despite the stock hitting an all-time high earlier in the day, has raised concerns about a potential broader market pullback, CNBC reported.
Despite ending the week with a 6% gain, Nvidia’s turnaround left investors concerned about the broader market’s reliance on AI stocks. Five of the “magnificent seven” technology stocks, excluding Nvidia and Meta Platform Inc HALF, recorded a decline last week. This has led to concerns about a potential correction in AI trading.
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Jonathan Krinsky wrote in a note on Sunday: “A consolidation in AI trading has been expected for a while now, so Friday’s key reversal day could signal the start of such a détente.”
Other market watchers have also warned against too much reliance on AI stocks, warning of potential dangers for the market as a whole.
Dubravko Lakos-BujasJPMorgan’s chief global equity strategist pointed out that investors flocking to a handful of high-quality mega-cap technology companies with strong balance sheets have caused worrying imbalances in the market.
In a Sunday note, Lakos-Bujas wrote: “Given this relationship, coupled with very bullish investor sentiment and positioning, we caution investors that this relationship will likely work in reverse when AI euphoria peaks. While the The market’s bullish beta at NVDA is significant (as is the case for META and AMZN), the market’s bearish beta for these stocks is even stronger… which could result in higher tail risk for the market.”
Because matter: The recent turnaround in Nvidia stock comes at a time when the market’s heavy reliance on AI stocks has been a cause for concern. Despite ongoing concerns, the Magnificent Seven’s technology stocks, including Nvidia, were considered undervalued relative to the broader stock market. JP Morgan analysts.
However, the Magnificent Seven’s dominance of the stock market may be coming to an end, according to the analyst who popularized the label. The group’s fortunes have diverged this year as their dominance of the stock market declines.
Goldman Sachs He also signaled growing concern about the heavy concentration of the U.S. stock market and the dominant influence of its biggest technology stocks, urging investors to broaden their geographic diversification.
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