Markets with Megan

Can NVIDIA sustain its dominance in the AI chip market, or are we witnessing the beginning of a tech bubble? On this episode of Markets with Megan, we dissect NVIDIA's highly anticipated second-quarter earnings report, a pivotal moment that could either solidify its market leadership or spark serious questions about the longevity of the current tech rally. With the company's market cap soaring past $3 trillion, its performance isn't just a company-specific event but a critical indicator for the broader tech sector and the S&P 500. Investors are on edge, balancing optimism about AI's transformative potential against concerns over sky-high valuations and dwindling tech stock momentum.

Join us Megan as she looks into the broader implications of NVIDIA's earnings for the tech sector and the market at large. We'll explore how the recent Jackson Hole speech has left markets in a holding pattern, and why next week's employment report could be the next big market mover. This episode offers a nuanced analysis of whether AI's promise will reshape our future or lead to another financial bubble. Tune in for expert insights and stay informed about the key economic data driving today's markets.

Well, the day is here for the much-anticipated NVIDIA earnings for the second quarter of this year. This is your regular segment of Markets with Megan. It is Wednesday, august 28th, and why in the world are we focusing on one individual company? We typically don't do that, however, nvidia. It's unfortunate that the entire market's kind of been in a standstill after we got the Jackson Hole speech from the Fed last week, waiting for these earnings. When you have a company that makes up about 7% of the S&P 500 index and whose market cap has ballooned to over $3 trillion and, to put that into perspective, that's bigger than the economy of France and it's almost as big as the economy of the UK that gains some attention from investors. Now, if you've lived under a rock NVIDIA just to understand it is a company that has really been the darling in regards to AI, because they make the high-speed chips. These chips are difficult to manufacture, but NVIDIA seems to have the stronghold on this. So what we've seen is some people try and enter this space, but, in fact, most have just decided to buy chips from NVIDIA. So that's why we've seen the stock price go up over 750% since 2022. So why is NVIDIA earnings so important today? Well, technology rising so much and making up so much of the S&P 500 return from 2020, the end of 22 to 23, and even the beginning of this year, it's really started to lose momentum. If you just look, since the end of the second quarter, the NASDAQ is underperforming the S&P 500 equalal Weight Index by almost 6%. So we're starting to see some broadening out away from these technology names because they've rallied so so much. Now this euphoria in AI has also started to wear off and people are starting to say whoa, whoa, whoa, there's these elevated multiples. We need to see something for this. Now. We've had a couple of tech companies already report and what's happened is that they've put a significant amount of money into CapEx spending on AI, but their revenues aren't really generating anything off of it yet. So investors are getting scared not scared of this is a long-term theme, but scared that they're paying way too high in multiples for that. So we've started to see that pull back.

Now what do we think going forward? We believe in AI. This is going to be a fundamental change for the future, and when you have that saying, history doesn't repeat itself, but it often rhymes. This does seem to us a little bit like a dot-com type of momentum trade. Now, we don't think these companies are in the same financial situation as the companies in the dot-com bubble Not at all. These are well-established companies, but this is a brand new idea and when you have so many people that are afraid of missing out that FOMO, that fear of missing out and they decide to pay any multiple for these companies, you tend to see these bubbles start to exist, and we do think that some of this technology sector is looking bubble-like. We've often expressed our concern about how long this is sustainable.

We don't know what NVIDIA will come out with today. Will it reinforce that they continue to be the king here of the AI market, or will it disappoint investors? And we'll be back. We'll give you some updates tomorrow on what the earnings showed us, but more primarily from the tech sector as a whole. How did the rest of the tech sector perform after the NVIDIA earnings? Because, again, we're not focusing on one specific company for the long run.

Now, that's what we have today, just to kind of give you an idea on NVIDIA. We will be back. There's more economic data and, as I said, we'll mention NVIDIA earnings as well. But between NVIDIA earnings and next Friday's employment report. These markets are going to stay pretty quiet until we get both of these reports. The NVIDIA is going to either confirm or deny this continued reach towards record high for equities, and the employment report will let us know how much the Fed can cut rates in September. That's all we have Again. If you like this podcast, please hit the like button, subscribe that alarm bell. That's there as well, and if you'd like to see historical episodes of Markets with Megan, please reach out to themarketswithmegan. fm. Thank you.