Can Nvidia And The AI Boom Save The U.S. Stock Market And Economy?

It is without a doubt the hottest stock of 2023. The trillion dollar club getting a new member today, Nvidia becoming the first ever chip stock to reach that milestone an astounding run for a stock that has just simply soared. Nvidia's new entry into the trillion dollar valuation club just the latest milestone in the AI boom we've seen this year. And now it's powering the broader market

gains this year. The Magnificent Seven, they are all up between 35 and 180% this year, and in May alone Alphabet and Amazon they're up 15% each, Nvidia nearly 50. Well, the market has had so much to grapple with over the last year. They've been worried about a looming recession coming, they've had to deal with a high level of uncertainty from the Fed and all of the

interest rates that we've seen come down the pike from there, and just kind of looking at all of the uncertainty. The geopolitical uncertainty with Russia, and then you had these debt ceiling negotiations in Congress. So this was sort of this bright light that got shown into the markets, gave investors a sense of, once we get past all of this, here's where the future is going to

be. But will the AI boom be enough to save the stock market and the US economy at large? What happened with Nvidia was not just the fact that it had a blockbuster quarter, but it guide it even stronger ahead. So the message to the market was, the future really is looking even stronger than the present. When ChatGPT came out in November, that was a earthmoving moment

for the industry. And then Nvidia was able to come along and basically quantify that and say, we not only had this huge quarter last time around, but we're looking at $11 billion dollars in sales over the next quarter. I think the opportunity is enormous. I think we are at a paradigm shift in terms of how data centers and other things are architected. We're seeing incredible orders.

to retool the world's data centers. You're seeing the beginning of, you know, call it a 10-year transition to basically recycle or reclaim the world's data centers, and build it out as accelerated computing. So this really took everybody off guard and the market, shares went crazy. Nvidia shares have continued to climb since then. They've had a blockbuster year, they've had a blockbuster 12 months. And it now

looks like it's paving the way for even greater growth ahead. Investors are now pouring money into AI stocks and the companies that could benefit from the new technologies. The problem, though, is that most of that money is going to a select number of companies like Apple, Nvidia, Microsoft and Tesla. The fear is that this could all lead to a stock market made up of just a

few winners, and many, many losers. Closing out the month of May in the green, the NASDAQ did post its first three month win streak since 2021. Well, I think you do need some perspective here. One of the big things just to realize is that in terms of broad market performance, it hasn't really mattered a whole lot. The S&P 500 and the Dow really didn't move very

much at all on this news. It made a pretty good impact on the NASDAQ, of course, where those tech stocks are focused. There's no question that the indices, the headline indices have been amazingly resilient. But again that's, if you take out seven stocks, in many cases, you're down on the year. The S&P 500 has basically been the S&P Seven, we've just seen stocks like Nvidia, Microsoft,

Apple, Amazon Meta, Tesla. Those are the companies that are pretty much calling all the shots here now. And this seems to be more and more a stratified market. Pay really close attention when we call for a turnaround in the tech buying environment, and where it's really moving from a measured environment to an aggressive environment. And I already will tell you what the catalyst of that will

be, I can see it with our customers, it's artificial intelligence. Nvidia's rapid success hasn't yet spilled over to the broader stock market. What we saw initially from Nvidia is that that stock did very well, some of his competitors, namely Intel, took a real beating as Nvidia went up, so they're going to be winners and losers in this space. What you would hope for now is that

as technology bleeds its way through the economy, some of those gains, there's incredibly outsized gains that these huge companies have seen, start to filter their way through the rest of the market and rest of the economy. I think that the big idea here is that this may be isn't the big story over the next couple of weeks or the next couple of months. But it's certainly

the story over the next number of years, that companies on all levels are going to have to figure out how they're going to navigate their way through this, how they're going to use this technology best. There definitely will be winners. There will be companies that are in this center of it , that'd benefit from it. Obviously Nvidia is going to be a main player in that

area. We are clearly early, this has just begun. And if you're looking out three years, five years, 10 years, I remain convinced that the upside is still considerably like more, much more in front of us and it is behind us. For some investors and analysts, though, there is fear of a looming bubble. There's no question I think that we have a price bubble. And, you know,

we had a price bubble with the dot-coms and the Internet back in the late 1990s. It feels a little bit overdone. And I think you look at the rest of the market, whether it's the equal weighted S&P 500, cyclical stocks, the dollar, commodities, it's all telling you that a slowdown is coming. So, I think the broader market is much weaker than the headline would tell you.

One of the things I think you have going for you in this environment, that a lot of those bubbles are typically fed by very loose policy, very loose fiscal and monetary policy. We don't really have that so much right now. We just saw this bruising debt ceiling battle, in which congressional leaders are trying to put some caps on that spending. We see the Fed raising interest

rates, we see them reducing their balance sheet. So you don't have that free money out there, that cheap money out there that, that people so often used to chase bubbles. So it's a little bit more measured of an approach here. So, what does this all mean for retail investors? I think one of the biggest things that investors have to grapple with here now is valuation. When

you see those big gains from Nvidia, and of course all of those other companies that we talked about, you start to worry about okay, when does this start to get out of hand? When are the pullbacks going to come? You know, supposedly the high tide lifts all boats. This is a very selective tide. And I'm not ready to throw out the confetti yet. You've got to

be really leery of chasing this. So I think you know, you never want to buy at the top. And that's what you might be doing right now if you jump in there and try to ride this wave. I think it's more likely that these recent winners come down to meet the laggards in the rest of the market. If the tech stocks do start to pull back,

I do think that there are going to be a lot of retail investors who might just view that as a buying opportunity. So if they do come back it actually helps the market in a way, because it lowers valuations and it creates more attractive entry points for, for people to come on in there. Nvidia's rapid rise to a trillion dollar company was a signal for investors

that the AI boom is for real. This is Nvidia CEO Jensen Huang speaking during a commencement speech last month at National Taiwan University. You're at the beginning, at the starting line of AI. Run. Don't walk. Remember, either you're running for food, or you are running from being food. And oftentimes, you can't tell which. Either way, run.