Can the S&P 500 index and Nasdaq Composite hold on to their 2023 gains if Nvidia Corp. falls? It’s a question that’s cropping up more and more these days.
And not without reason. Tesla Inc.
TSLA
,
another member of the so-called “Magnificent Seven” alongside Nvidia
NVDA
,
has seen its shares sink 20% over the past three months, according to FactSet data. The latest leg lower followed an earnings report released last month some described as “disastrous.”
See: Tesla’s stock falls after earnings. Is Wall Street missing the big picture?
Now, attention is turning to Nvidia after the chipmaker and artificial-intelligence darling saw its shares briefly break below $400 a share, what technical analysts have described as a key level of support.
Since the beginning of 2023, Nvidia has become the poster child for this year’s rebound thanks to its position as one of the prime beneficiaries of the artificial-intelligence boom as its chips are essential for delivering the immense computing power necessary to power generative AI software.
Nvidia shares are up more than 179% since Jan. 1, according to FactSet data, the biggest gain of any S&P 500 stock, and its percentage gain is more than twice that of the next-best performer among the so-called “Magnificent Seven”— Facebook owner Meta Platforms Inc
META
.
Dow Jones Market Data show that the “Mag Seven” have gained trillions of dollars in market value this year, offsetting an aggregate decline for the remaining 493 companies in the S&P 500. In addition to Nvidia and Meta, the group includes Microsoft Corp.
MSFT
,
Google parent Alphabet Inc.’s Class A
GOOGL
and Class C
GOOG
shares, Amazon.com Inc.
AMZN
,
Tesla Inc.
TSLA
and Apple Inc.
AAPL
See: ‘Magnificent Seven’ stocks have shed more than $1.2 trillion in value since the market’s July peak
Now, Jonathan Krinsky, chief market technician at BTIG, in a note to clients shared with MarketWatch. believes Nvidia is poised to continue to slide during the three weeks until its upcoming earnings report, set for Nov. 21, potentially taking the rest of the market with it.
“Nvidia is the undisputed ‘King’ of the current market, and so if one is making a bearish case for the market, for tech, for semis (as we are), then it has to involve [Nvidia] finally succumbing,” said Krinsky.
Following its latest technical breakdown, Krinsky believes the stock could fall another 10% in short order. The stock was trading at $414.12, up 1.6% on the day, shortly after the U.S. market opened on Wednesday, according to FactSet data.
The S&P 500
SPX
is up 9.6% year-to-date as of early Wednesday, according to FactSet. But the index owes all of its gains to the Mag 7, a reality that has led some Wall Street analysts to question the durability of 2023’s stock-market gains. The equal-weighted S&P 500 index, which assigns each member a fixed weight instead of heavily weighting toward the largest companies, is down 4.3%.
The Nasdaq
COMP,
which is even more exposed to the Magnificent 7, is up 23.3% year-to-date, FactSet data show.
Both indexes have fallen sharply since the S&P 500 booked its highest closing level of the year on July 31, with both dipping into correction territory last week, meaning a drop of 10% or more from a recent high. Both the Nasdaq and S&P 500 booked their worst October performance in five years last month, Dow Jones data show.