Why Nvidia rug pull doesn’t faze US stock market bulls: Morning Brief

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Nvidia just made history. Again.

On Monday, Nvidia stock closed at a record high, its first since November. Investors piled in ahead of CEO Jensen Huang’s highly anticipated CES keynote — perhaps anticipating the big reveals needed to stoke artificial intelligence hype.

Speaking to a packed audience of over 6,000 in Las Vegas, Huang laid down a bold vision for what he called the “era of physical AI.”

“The ChatGPT moment for general robotics is just around the corner,” Huang declared, signaling that AI’s potential is only beginning to materialize in physical systems such as its Cosmos platform. He also spotlighted Nvidia’s partnership with major automakers like Toyota and Volvo, leveraging its DRIVE Hyperion platform to power next-gen autonomous vehicles.

According to Huang, “Building autonomous vehicles, like all robots, requires three computers: one to train, one to simulate, and one in the car. And Nvidia powers them all.”

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Futuristic, trillion-dollar visions of Nvidia-powered humanoid robots and self-driving cars dominated investor minds into the early morning, sending the stock to fresh record highs.

But when Wall Street opened for business with the opening bell on Tuesday, a “sell the news” fever gripped Nvidia investors, culminating in a $220 billion drop in market capitalization — its worst in four months.

It’s a familiar story for Nvidia investors: a record high followed by a rug pull.

Investors got a taste of this most recently after Nvidia’s Nov. 20 earnings release. The stock rocketed north of $150 for the first time, only to be met with investor selling, leading to a 13% fall.

It’s also reminiscent of the June 20, 2024, pop to $140, which was met by a 27% sell-off that caused Nvidia to cede the world’s largest stock title to Microsoft.

A similar story evolved around the disappointing February 2024 monthly jobs report released March 8, which sent stocks reeling. Nvidia opened at a record before posting its worst return in 10 months, leading to an eventual 20% pullback.

It’s also an echo of the Aug. 23, 2023, earnings announcement that rocketed it to $50 for the first time (on a split-adjusted basis), only to see it frustrate bulls and trade sideways for four months.

The bottom line is: Nvidia might be the undisputed leader of this bull market, and it has frequently frustrated bulls. But it hasn’t yet upset the general bull market in US stocks.

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