Beneath the Surface
Nvidia Goosed 401(k) Millionaires – Beware
May 24, 2024 • 3 minute, 57 second read
“History shows us, over and over, that bull markets can go well beyond rational valuation levels as long as the outlook for future earnings is positive.”
– Peter Bernstein
[Special Reminder: In case you missed our recent announcement, The Essential Investor has merged with legacy contributors to Agora Financial. The new, larger, more inclusive project is called The Grey Swan Investment Fraternity. If you’re interested in the scope and benefits of our new endeavor, please see what prompted us to merge here. If you’ve been a member of The Essential Investor, please keep an eye out for your new benefits.]
May 24, 2024 – This interesting stat shows the extent of the market’s current rally. It’s the total number of individuals with at least $1 million socked away in their 401(k):
New 401(k) millionaires can thank Nvidia, in part, for their own investing genius.
This single company alone – which has more than doubled since the start of 2024 – accounts for 5.8% of the S&P 500 by weight.
The $2 trillion dollar AI chip maker is also one of the greatest threats to the stock market and individual investor wealth we’ve seen since funds were overweight mortgage-backed securities in 2007 — 08.
We’re doing a deep dive into the meaning of AI for the June Grey Swan Bulletin we send to paid readers.
In it, we’ll introduce new Grey Swan contributor Zoltan Istvar, who, if anybody does, has the perfect name to match his status as a world-renowned futurist.
Further introductions are on the way…
Also, one company we’re looking into is a small cap producing energy for server farms dedicated to AI computing.
With a gain of 412% over the past 12 months, the company’s share growth has outpaced Nvidia. We haven’t decided whether to pull the trigger yet, but the energy sector for AI is intriguing, to say the least.
The case for waiting to buy in, at this point, is largely made by the Global Markets Investor substack post we’ve republished below.
Hint: The company’s market cap is now larger than the stock market in Germany, South Korea and Australia… enjoy! ~~ Addison
NVIDIA is One of the Largest Threats
to the U.S. Stock Market
On Wednesday, after the market closed, Nvidia released its financial report for the fiscal first quarter 2025. The company’s earnings per share came at $5.98, above Wall Street estimates of $5.57. Revenues in first quarter were $26.04 billion, beating average forecasts of $24.55 billion. Adjusted gross margin came at 78.9%, above the analysts projected 77%. As you can see, these are really great results and substantially exceeded expectations.
Moreover, in the last four quarters, Nvidia’s revenue has tripled year-over-year and reached $79.77 billion.
What caused the stock to move higher, however, was the 2Q 2025 sales outlook of $28.0 billion (plus, minus 2%) which came significantly above Wall Street estimates of $26.8 billion. The chip-maker also announced a 10-for-1 stock split and raised its quarterly dividend by 150% to 10 cents a share.
As a result, Nvidia rallied by 9.3% on Thursday and closed above the $1,000 per share mark for the first time ever. The company added $217.7 billion to its market value in just one day, more than the combined market cap of McDonald’s and Ford and almost $80 billion more than the value of Intel.
The below meme perfectly shows Thursday’s and the last few quarters of U.S. stock market developments.
On Thursday, the S&P 500 closed down by 0.7% and the Nasdaq by 0.4% as recent economic data showed that inflation has not been easing. However, if not for Nvidia’s 9% gain, the stock market would have easily dropped by more than 2%.
Nvidia’s performance indeed looks great, and the company has been materially exceeding market expectations for the last two years. However, have the things not moved too far and too quickly?
The company has become so great that it should be considered as the largest threat to the U.S. stock market performance in the months ahead. ~~ Global Markets Investor
So it goes,
Addison Wiggin,
The Wiggin Sessions
P.S. Monday is Memorial Day, and the stock market is closed. As has been our modus operandi for decades now (oof!), we’re not going to publish on Monday. Enjoy your long weekend!
(How did we get here? An alternative view of the financial, economic, and political history of the United States from Demise of the Dollar through Financial Reckoning Day and on to Empire of Debt — all three books are available in their third post-pandemic editions.)
(Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites:Bookshop.org; Books-A-Million; or Target.)
Please send your comments, reactions, opprobrium, vitriol and praise to: addison@greyswanfraternity.com
