Will the Market Cap Rumble Create Investor Opportunity?

Nvidia has surpassed Apple and Microsoft as the most valuable company

Managing Editor
Jun 21, 2024 at 12:16 PM
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Subscribers to Chart of the Week received this commentary on Sunday, June 16.

As the artificial intelligence (AI) space bleeds into nearly every sector, the main sphere of semiconductor, tech hardware, and cybersecurity stocks continue to sit in the driver’s seat. In the past week alone, the likes of CrowdStrike (CRWD) and Broadcom (AVGO) generated headlines regarding supply and an upbeat earnings outlook, both enjoying outsized stock moves -- with the whisper of AI buzz as a main contributor.

Pulling up late to the AI party was Apple (AAPL), revealing at the Worldwide Developer’s Conference (WWDC) last week its new partnership with OpenAI’s ChatGPT, among a slew of new iPhone AI features. The free updates will be rolled into its products and includes adjustments to Siri’s functionality as well. Shortly after its conference, the shares of AAPL climbed to a fresh record high of $220.20 on Wednesday and briefly took the place of the most valuable company in the world, surpassing Microsoft (MSFT) at $3.3 trillion. This is especially interesting given Nvidia’s (NVDA) emergence in 2024 vying for the same title.

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Apple stock enjoyed a 6% post-earnings bull gap on May 3 after topping expectations, reclaiming its 60-day moving average that had been resistance since February. Now AAPL is enjoying a nine-month gain of 22%, and at $212, has made a sound recovery from its nearly one-year April 19 12-month lows below $164.

Heading into today analyst sentiment has been overwhelmingly optimistic, with 21 of the 30 covering brokerages sporting a "buy" or "strong buy" rating. Even options traders have been riding the bullish bandwagon, with data at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), showing a 50-day call/put volume ratio of 1.97 which ranks higher than 79% of readings from the past year.

The dance of market caps (specifically across the "Magnificent Seven") threading through the buzz surrounding AI development and tech advancements will be an entertaining - and everchanging - one to watch. That is, especially for those dependent on the race to the "top." However, as the water steadies well into the $3 trillion mark for our biggest gainers, it’s equally possible to imagine hitting a ceiling in value, as well as wondering if the growth and money will ever end at all.

It can be more than entertaining though, to a prudent investor that values the psychological significance of ‘round numbers.’ Keep an eye out for these round number milestones to serve as hesitation points, support, or possible runways for even more gains.

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