Shares of Nvidia (NVDA) are rebounding in Tuesday’s session after a three-day sell-off. Interactive Brokers Chief Strategist Steve Sosnick joins sector Domination to discuss Nvidia’s stock movement and the broader tech rally.
“It’s Nvidia’s sector and we’re all just trading in it,” Sosnick explains. He notes how Nvidia has been spearheading the tech sector’s expansion (XLK) and the broader sector rally (^DJI, ^IXIC, ^GSPC). While the tech sector’s rally may spark concerns, he notes that its recent dip isn’t a problem “because of end-of-the-quarter factors making it more of a rotation.”
“These companies do earn very good money. And someone asked me today, ‘Would you buy Nvidia at these levels?’ And my comment was kind of neither here nor there because it’s not cheap, but it’s not expensive either, because they do earn ridiculous amounts of money. It’s just how much expansion is priced in,” Sosnick explains.
He points to “weaponized FOMO” as one of the themes driving the sector rally:
“For institutional collection of investments managers, it’s the real deal. And the reason being is they can’t be behind their peers. So, if that guy over there is making a ton of money in Nvidia or that guy’s making it in GameStop (GME), I may not have put all my chips on the table. That’s fine. But if I’m an institutional investor, I can’t professionally be in that bottom quartile. I can’t miss this rally,” he explains. Sosnick adds that this creates a “piling effect” where equities become very heavily weighted.
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