Tech-heavy Nasdaq Composite Index currently trades at a record high, thanks to the AI-fueled rally.
Tech rally has predominantly fueled the market upside in the current bull run, and a wealth manager said on Saturday that Nvidia Corp. NVDA in particular has drawn investments out of the other sectors and even the rest of the tech stocks.
Nvidia’s Far-reaching Impact: “Nvidia is sucking the oxygen out of the room,” said Lumida Wealth co-founder Ram Ahluwalia in a post on X, formerly Twitter.
Sharing a chart of the S&P 500 sector indices, he said every sector is hurting except tech. The financial advisor also traced back the declines in other stocks to Nvidia’s strength. “Your [Lululemon Athletica Inc] stock is down because the owner decided to buy $NVDA. Your $SNOW stock is down because the owner decided to buy [NVIDIA].”
Much against his earlier expectations that the phenomenon would be limited to techs, every sector seems to be impacted, Ahluwalia said. He went a step further and noted that stocks across the Atlantic were also flat-lining due to the Nvidia pull. “I believe the ‘AI story,’ with [NVIDIA] as the leader, is causing the weak breadth stats,” he said.
Ahluwalia’s deduction comes amid analysts’ concern over a lack of breadth in the current market rally. Granted, the Nasdaq Composite is at a fresh record and the S&P 500 Index is trading just off its record high. But much of the upside is fueled by the strength in Nvidia, Alphabet Inc GOOG GOOGL, Amazon.com, Inc. AMZN, Apple Inc. AAPL, Microsoft Corporation MSFT and Meta Platforms, Inc. META – all of which have AI exposure.
The iShares Russell 2000 ETF IWM, an exchange-traded fund that tracks an index comprising small-cap stocks, is down about 0.5% this year compared to the nearly 14% and 18% gains, respectively, for the broader S&P 500 Index and the Nasdaq Composite Index.
See Also: Best Artificial Intelligence Stocks
“I am surprised by how powerful this effect is,” Ahluwalia said. “If you told me every sector would be down red and Nvidia and AI friends are sucking the oxygen out of the room at this level, I wouldn’t have believed it.”
Market strategists have premised their optimism on the AI-frenzy spearheaded by Nvidia. On Sunday, Evercore ISI chief equity and quantitative strategist Julian Emanuel raised his S&P 500 year-end target to 6,000, which suggests a 26% gain for the index this year. He attributed his positive expectations to ebbing inflation and AI fervor that will likely propel stocks even higher.
The AI bubble may not burst any time soon, analysts say. Deepwater Asset Management’s Gene Munster expects that the bubble will last at least three to five years.
In premarket trading on Monday, Nvidia rose 0.67% to $132.77, according to Benzinga Pro data.
Read Next: As Apple, Nvidia Trade Near All-Time Highs, Jim Cramer Tells Investors To Cash In On AI Stocks: ‘Let’s Not Be Too Greedy’
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