Nvidia takes a bath in reality and loses first place in the marketcap ranking

And it is that Nvidia has been increasing its market cap in the last year or so, and its rapid rise now appears to be giving the market pause. Although the company once owned the podium as the world’s most valuable company by market capitalization, it returned that title to Microsoft on Thursday.

Now Nvidia stock is on track for a second straight session of losses. The company’s paper falls sharply and places the market capitalization at about US$246 billion. However, analysts maintain their optimistic view of the stock and put the company’s market capitalization bonanza into perspective. Well, the fact that market value is transferred quickly does not make it wrong.

JPMorgan warns of market vulnerability

The bull market has crushed the bears. This leaves stocks more vulnerable to bad news, JPMorgan says.

And the fall of Nvida, the locomotive of the S&P 500, is the topic of conversation on Wall Street, since Friday’s futures indicated a turbulent start to the new session.

Does the reversal signal the end of the exuberance that saw Nvidia briefly become the world’s most valuable company, dragging many other AI stocks higher? Or is it just a brief bout of profit-taking for a stock that momentum indicators suggested was deeply overbought?

Time will tell. But judging by the way a broad spectrum of big tech stocks reeled from Nvidia’s turnaround on Thursday, The swing suggests that a market that has risen to all-time highs may have become increasingly sensitive to emerging doubts about supporting narratives or unexpected news.

One reason for this potential fragility is the bearish position at record lows in major assets, according to a team of JPMorgan analysts led by Nikolaos Panigirtzoglou.

“One support for the US stock market over the past year came from a decline in short interest in the two largest stock ETFs, SPY (S&P500) and QQQ (Nasdaq100),” he says in a note published on Thursday. A simple short position benefits from selling an asset and buying it back at a lower price. They can also be used to hedge long bets.

The JPMorgan team explains that since SPY and QQQ are some of the main vehicles that investors use to place bets on stocks at the index level, The reduction in short interest has provided support to the indices as those short positions were gradually covered.

Now, it could be the case that a reduction in short positions in SPY and QQQ means that investors have accumulated short positions in individual stocks instead. But JPMorgan says the data doesn’t support this.