NVIDIA's dominance affects US stock market
Date
6/24/2024 5:02:36 AM
(MENAFN) Many investors are expressing concerns over the significant influence of a single company, NVIDIA, on the gains seen in the US stock market. Over the past two years, NVIDIA's partner has experienced a staggering increase in value, soaring from USD400 billion to USD3.3 trillion, thereby becoming the most valuable company globally. However, there is apprehension regarding the potential repercussions if something were to impact the AI chip maker, given its substantial contribution to the overall market.
The complexity of the situation lies in the breakdown of the market gains, which can be categorized into four main groups. NVIDIA stands alone in one category, with the next group comprising the five leading technology companies: Microsoft, Alphabet, Amazon, Apple, and Meta. Following this, there is a cluster of ten semiconductor companies that have benefited from NVIDIA's ascent and the anticipation of a broader digital investment boom. Lastly, the remaining 484 companies in the S&P 500 index make up the final category.
Of particular concern is the fact that a single semiconductor company, NVIDIA, accounts for approximately 20 percent of the index's gains over a significant period. This concern is exacerbated by the additional 10 percent of gains attributed to companies in the same industry. Notably, shares of Broadcom, Qualcomm, Micron, Applied Materials, Advanced Micro Devices, LAM Research, KLA, Texas Instruments, Analog Devices, and NXP have collectively risen by an average of 84 percent since October, with uncertainty surrounding whether all will benefit equally from an AI boom.
Furthermore, an additional 25 percent of the gains can be attributed to the Big Five technology companies, all of which have experienced varying degrees of growth fueled by the promise of the same technology driving NVIDIA and the semiconductor companies. This underscores the significant influence of the AI sector, with approximately 56 percent of market gains being linked to AI-related investments. However, there is a looming question about the potential consequences if market sentiment shifts and AI companies are perceived to be less profitable than currently estimated.
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