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Nvidia, Apple And GameStop Are The Entire Stock Market Right Now…And That's Dangerous

Tyler Durden's Photo
by Tyler Durden
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Submitted by QTR's Fringe Finance

Everybody knows it but nobody is giving it any serious consideration: the entire market is being driven by Nvidia, Apple and even GameStop. And when one, if not all three of these names starts to experience some selling, they are likely taking the whole market with it.

I have been making note of the fact that Apple and Nvidia could be the market's black swans for the better part of a year now. And forget about cash on the sidelines eventually drying up as a result of savings running out, the market is also not taking into account multiple looming red flags for these names.

Zero Hedge has been all over the story of "bad" market breadth that no one on Wall Street seems to want to notice or talk about out loud. They wrote on X today:

For Apple, the company remains in the crosshairs of a massive antitrust investigation, the likes of which threw a cold blanket on Microsoft for the better part of a decade in the early 2000s. This is a very real risk that looms under the surface of the company's buybacks, which are likely a large portion of the bid now. The company's most recent 'innovation', the Vision Pro has also all but disappeared from public discourse after receiving tepid reviews.

Also, Apple and Nvidia share something in common: their valuations, at 33x and 77x ttm earnings, respectively, are extremely aggressive. There is a far better case for an air pocket under these valuations than there is over them. So on top of 5.5% rates, bone dry consumer savings, record high credit card debt, unmarked commercial real estate books and continued debilitating inflation, there's valuation risk. 

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And GameStop...well, what better weathervane could their be for the unsophisticated money in the market? As it swings wildly, so swing the last few desperate dollars of retail traders, many of whom are trying for one last "YOLO" in the market with whatever little cash they have left. In the meantime, the company remains a loss-making nightmare with nearly zero fundamental case as its foundation, but for the hoarde of cash it now has and may use to acquire bolt-on acquisitions of companies who aren't one step from death's door. 

And yesterday Zero Hedge noted that an equal weighted S&P - in other words, what the index would do if all components had the same weight and were being driven by Nvidia and Apple, which make up nearly 10% of the index - would be flat since February. 

If these two names were to fall in tandem, it could be the fuse that finally winds up killing this current bull market.

Goldman noted after Thursday's session this week that the NASDAQ finished the day +0.57% despite an astounding 70% of the names in the index trading lower on the session. 

And the Nvidia cycle of driving the market looks ponzi-ish, one response on X pointed out earlier this week: 

"40% of S&P 500 gains are due to just $NVDA. As weighting goes up, more capital must flow in (b/c of benchmarking), further driving price up. US government is entirely reliant on equity market going up (capital gains tax) revenue. US government is already essentially insolvent (massive debasement is required, just to service debt), and so requires an even larger amount of cap gains tax revenue, just to service existing debt load. US government can pass laws to funnel unlimited amounts of money ($52B CHIPS Act) to the very company responsible for the majority of its revenue (via cap gains on the appreciation it's caused, which is exacerbated as the weighting increases and forces benchmarking funds to further drive up the price)."

And round and round we go. The only thing they failed to mention in that cycle is Nancy Pelosi's purchases of Nvidia call options, which both add to the gamma squeeze and help her pocket cash based on having knowledge of the government's actions in the world of subsidizing their favorite industries/companies.

Zero Hedge joked on Friday:

But it really didn't seem like much of a joke. While the indexes mostly held up, social media users were pointing out enormous numbers of stocks down more than 3% on the session:

It was about a week ago that I wrote about Nvidia and why I thought it had become a disproportionately large risk to the overall market. The stock now represents 6.5% of the S&P 500, an astronomical amount for one name to make up a 500-name index, and appears to be hitting peak levels of hysteria, as evidenced by CEO Jensen Huang signing autographs on the breasts of women at computer shows.

This data shows that things aren't nearly as safe and sound as the indices may be making it seem. There is very real concentration risk in the market right now and, other than Zero Hedge, no one on financial news or mainstream media is talking about it. 

To the extent the seven stocks plus GameStop can remain "magnificent", the market will continue to hold up. But make no mistake about it: so goeth Apple, Nvidia and GameStop, so goeth the market. 

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.

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