Daily Brief - Nvidia's Nosedive

TLDR: Nvidia's stock hit an all-time high less than a week ago, briefly making it the largest U.S. company by market capitalization for a single day.

Stocks struggled to find their footing as Nvidia’s near $400 billion plunge fueled speculation that the tech-driven bull market needed a pause.

While some non-tech sectors made gains, Nvidia extended its three-day tumble, crossing the 10% mark — the technical definition of a correction. Nvidia, a linchpin in the AI boom, now holds the title of the most expensive stock in the S&P 500.

The stock's sharp rise has made it ripe for profit-taking. The latest MLIV Pulse survey reveals that over a quarter of respondents plan to reduce their stock holdings in the next month, compared to 19% looking to buy more. This gap between potential sellers and buyers is the widest since October, with nearly half of survey participants anticipating a correction later this year.

Wall Street is split on whether Nvidia's recent dip signals deeper, long-term issues. If the downturn in a few large-cap tech stocks spreads to the broader sector, it could spell trouble for the market, at least in the short term.

Eyes are on Micron Technology Inc.'s upcoming results on Wednesday, which could be pivotal for the tech sector's immediate future.

Scenario Spotlight: Which way?

The chart above illustrates NVIDIA's historical 1-month performance following a big drop in its stock price, specifically when the stock had increased by over 100% in the preceding 6 months.

Market Movers: Response from US sectors

Here are the top and bottom performing sectors on a 1-month horizon, following a drop in NVDA price:

Top 3 Performing Sectors:

1. Information Technology: 1.95%
2. Utilities: 1.74%
3. Energy: 1.12%

Bottom 3 Performing Sectors:

1. Consumer Staples: 0.18%
2. Consumer Discretionary: -0.02%
3. Financials: -0.71%

Earnings Spotlight: Micron reports tomorrow

Micron, a market leader in memory and flash storage chips, has returned to profitability after a recent losing streak. The company is expected to post adjusted earnings of $0.51 per share for its third-quarter report, compared to a loss of $1.43 per share last year.

Revenues are forecasted to surge to $6.66 billion, driven by a rebound in memory chip demand. With AI-driven growth prospects and increased investments in capacity expansion, Micron's stock is seen as a strong investment option.