Nvidia hits a new high, and the market value of the top three exceeds 3 trillion.

As is well known, after ChatGPT emerged in recent years, AI has become the hottest field. OpenAI, and other companies' large demand for processors has led to rapid growth in Nvidia's business because Nvidia once had an almost monopolistic position in the AI chip field.$Microsoft (MSFT.US)$, $Alphabet-A (GOOGL.US)$, $Amazon (AMZN.US)$, $Meta Platforms (META.US)$$NVIDIA (NVDA.US)$Affected by this, Nvidia's performance has exploded, and its net income attributable to its parent in fiscal year 2024 has increased by 581.32% year-on-year to $29.76 billion. In addition to selling products, Nvidia's stock price has also been rising steadily, breaking records.

With the popularity of its products, Nvidia's stock price has been soaring and setting new records.

On June 13, 2023, Nvidia's market value crossed the important threshold of $1 trillion; on February 23, 2024, Nvidia's market value rose above $2 trillion, setting the fastest record for the market value to grow from $1 trillion to $2 trillion; on June 5, 2024, Nvidia continued to forge ahead and smoothly exceeded $3 trillion, spanning from $2 trillion to $3 trillion in less than four months. With the soaring stock price, Nvidia surpassed many star stocks such as Meta, Amazon, and Google amidst doubts, and successively surpassed Apple and Microsoft, the two mountains with a market value of over $3 trillion, to compete for the entire market.

This means that there are currently three companies in the U.S. stock market with market values exceeding $30 trillion, namely Nvidia, Microsoft, and Apple, all in the first echelon; Google, Amazon, and Meta are in the second echelon, with market values exceeding $1 trillion. According to Strategas, after Microsoft, Apple, and Nvidia's market values broke through $30 trillion, the weight of the three companies reached more than 20%. In addition, the three US giants have accounted for more than 10% of the global stock market capitalization, which is the first time in history.

According to brokerage Strategas, after Microsoft, Apple, and Nvidia’s market values exceeded $30 trillion, the weight of the three companies reached more than 20%. In addition, the three US giants have accounted for more than 10% of the global stock market capitalization, which is the first time in history.$S&P 500 Index (.SPX.US)$

Is the US stock market an opportunity or a risk now?

It is worth noting that after the soaring rise, many institutions' analysts are still singing bullishly.

Daniel Ives, the stock research director of the well-known American 'technology stock advocate' Wedbush Securities, wrote in a recent report that the bull market of US technology stocks "has just begun," and he believes that Nvidia, Apple, and Microsoft will compete for a $4 trillion market value in the tech industry in the next year, and the second echelon also has sufficient room for growth.

The reason is that with the advancement of the Fourth Industrial Revolution, the demand from enterprises and consumers for these chips is increasing, and Nvidia's GPU chips are essentially new gold or oil in the technology field.

Michael Lippert, vice president and portfolio manager of Baron Capital Inc., also emphasized in an interview that Nvidia is not just a chip sales company. Nvidia's proprietary software and development ecosystem are also the factors for its success.

After Nvidia's 1-for-10 stock split, Hans Mosesmann, an analyst at Rosenblatt Securities, recently stated that Nvidia will continue to rise and its market value may reach nearly $5 trillion in the next year.

It should be pointed out that the weight of the three giants in the S&P 500 index and their proportion of the global stock market capitalization actually shows that the US stock market has some 'top-heavy' characteristics, with market value and liquidity concentrated in the head enterprises, especially the three giants.

In A-share terms, the current US stock market has a very obvious 'grouping' phenomenon, and there may be relatively serious bubbles.

With the rise of the market, there are also many voices that believe that the US stocks will "collapse".

Wall Street guru Gary Shilling warns that US stocks may plunge 30%, and a recession may come within a few months. He pointed out that the current stock prices are very expensive, and the Shiller P/E ratio of the S&P 500 index is about 45% higher than the long-term average. In addition, he also mentioned the risk of future "debt bomb".

JPMorgan's chief market strategist, Kolanovic, recently stated in a report that our cautious position is based on our view that there is no upward space without re-adjustment, and any upward space must come from profit growth. However, we believe that even under the best circumstances, profit growth is not enough to bear the risk of stocks. According to the above report, Kolanovic said that in order to avoid a 20% pullback, we must believe that technology stocks will become a more meaningful driver of overall economic growth in the short term. However, he does not agree with this optimistic prospect and advises investors to remain patient before investing.

There has never been a market that only goes up and never goes down, and there are no stocks that only go up and never go down. According to the experience in A-shares, under extreme clustering of funds, the incoming funds are decreasing, and in the end, it will only end in failure, even for stocks like Kweichow Moutai (600519.SH) which is known as a "cash cow".

Conclusion

Once the Federal Reserve begins to cut interest rates, some of the capital gathered in the US is likely to flow into the "hole" of emerging markets, whether it will deal a heavy blow to the tightly clustered US stock market remains to be seen.

In the bundling of funds, technology stocks represented by Nvidia have risen too much and too fast in recent years, accumulating many profit-making positions, and risks have been accumulating. From the experience in A-shares, under extreme clustering of funds, the incoming funds are decreasing, and in the end, it will only end in failure, even for stocks like Kweichow Moutai (600519.SH) which is known as a "cash cow".

In fact, the soaring stock prices have already triggered some corporate executives to reduce their shareholdings. Taking Nvidia as an example, statistics compiled by Washington Service show that Nvidia executives and directors have sold approximately 770,000 shares of the company's stock worth more than $700 million from the beginning of the year to date, not including the impact of the stock split on June 10.

Statistics show that some funds have begun reducing their holdings in emerging market equity funds. Among all investors, the vast majority remain relatively steadfast with their allocations in global equity funds but are increasingly becoming risk-averse as the market enters its mature phase.

Edited by Jeffrey