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Nvidia's outsized representation in day-to-day stock trading
could leave investors more vulnerable should the chipmaker's
revenue growth fail to meet investors' high expectations and
puncture a Wall Street rally that has been fueled by euphoria
about artificial intelligence.
The Santa Clara, California chipmaker's quarterly report on
Wednesday will be one of Wall Street's most watched events of
the week. Some strategists believe anything short of a blowout
report could reverse a rally that has sent Nvidia's stock
soaring 47% in 2024.
About $30 billion worth of Nvidia shares changed hands daily on
average over the past 30 sessions, pulling ahead of Elon Musk's
electric car maker, which averaged $22 billion per day over the
same period.
Tesla since 2020 had dominated daily U.S. stock trading,
according to LSEG data, with turnover -- a stock's share price
multiplied by the number of shares exchanged -- peaking above
$35 billion several times in recent years.
On Friday, combined trading in Nvidia and Super Micro Computer,
another company benefiting from the boom in AI, accounted for
over 40% of all turnover of the 10 most traded U.S. stocks,
including Tesla, Meta Platforms, Apple, Amazon and Microsoft.
"There's an argument here that this is the dawn of a new era of
trading, like the dawn of the internet, with Nvidia in the pole
position," said Dennis Dick, a trader at Triple D Trading in
Ontario, Canada.
But Dick also warned that sky-high turnover in AI-related stocks
suggests retail investors and algorithmic traders are driving
share prices higher based on momentum rather than fundamentals,
such as expectations of future revenue growth.
Super Micro, which sells AI-related server components to Nvidia,
has seen its value more than triple to $45 billion so far in
2024. It tumbled 20% from record highs on Friday after Wells
Fargo started covering the stock with an equal weight rating,
saying its valuation already discounts "solid upside".
Nvidia controls about 80% of the high-end AI chip market, and
last week its market capitalization eclipsed, separately,
Amazon's and Alphabet's to make it Wall Street's third-most
valuable company, behind Microsoft and Apple. Nvidia's stock
market value has surged to $1.8 trillion from $540 billion a
year ago.
Meanwhile, Tesla's stock has tumbled 20% so far in 2024 as it
struggles with tepid demand for its electric cars and growing
competition.
(Reporting by Noel Randewich; Editing by Cynthia Osterman)
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