Nvidia Stock Is Bouncing. Is a Broad Market Rally ‘Likely to Follow’ Its Rise?

KEY TAKEAWAYS

• Nvidia shares are rising today after steep recent declines, lifting indexes and AI-linked ETFs.

• The stock has been under pressure lately owing to revelations about CEO Jensen Huang.

• Investors will be closely watching Nvidia’s quarterly results due next week.

Nvidia is getting a bounce today. That’s good news for markets.

Shares of Nvidia (NVDA) were recently up 4%, rebounding from a brutal start to the week—and to the month, which as of last night’s close saw the stock down 18% in November just weeks after logging record highs.

The latest sell-off was largely due to unusual and company-specific factors, namely the revelations that the company’s board was investigating CEO Jensen Huang’s relationship with an alleged Chinese spy. But broader issues have also weighed on Nvidia, the world’s second-most valuable company and a key component of major indexes and investors’ portfolios.

While the phrase may seem trite, with Nvidia set to report quarterly results next week, all eyes may really be on it right now. Money management firm Hirtle earlier this week said that while its portfolios are generally underweight AI right now, it could look to increase exposure back toward levels in line with the S&P 500 broadly; it estimates that about half of the index’s weighting is tied to AI spending.

“We may move closer to benchmark weights if stronger evidence of investment returns, more attractive prices or a combination of the two makes the opportunity more compelling,” Hirtle wrote. “For long-term investors, the task is to participate in technological progress while maintaining discipline about the price paid and the concentration accepted.”

With Nvidia rising today, investors are exhaling, with stocks rising broadly and AI-linked ETFs such as the iShares Semiconductor ETF (SOXX) also higher. That’s likely not only due in part to a sense that the company’s shares had fallen far enough, but perhaps also that investors had become too bearish after inflation data released yesterday raised fears that the Fed would lift interest rates by a half percentage point next month.

“It’s difficult for me to envision a sustained rally in the S&P 500 without Nvidia participating,” Mott Capital Management’s Michael Kramer wrote yesterday. “At this point, where Nvidia goes, the broader market is likely to follow.”

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