Every week I’ll provide updates on the latest trends in cloud software companies. Follow along to stay up to date! Big Tech Rotation For the last 18 months Big Tech has been on a tear. So much so that the market created a separate name for them - The Magnificent 7. This group includes Apple, Microsoft, Google, Amazon, Nvidia, Tesla and Meta, and has been responsible for a significant percentage of the overall gains of the Nasdaq. Today, their combine weighting in the Nasdaq is ~40%. If we rewind the clock back to the start of 2023, here’s how the Magnificent 7 has performed from then till now:
Interesting perspectives, Jamin, however it likely misses the fact that this week was a major monthly options expiration in the Vix, indexes and stocks. For many of the mega caps, especially NVDA, about 40-50% of their trading volume is options market driven. This week, these options positions started unwinding, market makers started removing their hedges and they had to sell their stock positions. While there was some rotation from mega caps to small caps, most of the move was options unwind in the mega caps. Additionally, on the small cap front, most of the move higher was short covering. If you see which small caps went higher, many of those names were heavily shorted and the short squeeze accentuated the “rotation” narrative.
Want more crazy stuff this week? Well two rumors hit semis. Both turned out to be untrue. #1 Xi in China as rumored to have a stroke early in the week. This is untrue. #2 Trading desks started hearing that a Taiwan invasion by China was imminent. Again untrue.
And then there is the pro-Trump trade that markets started selling stuff that was China dependent and the mega caps which are not liked by his team.
So many undercurrents played out this week…one of the most chaotic I have ever seen.
We live in interesting times and as investors we always have to be on our toes sifting through what is real and what is a mirage.
Interesting perspectives, Jamin, however it likely misses the fact that this week was a major monthly options expiration in the Vix, indexes and stocks. For many of the mega caps, especially NVDA, about 40-50% of their trading volume is options market driven. This week, these options positions started unwinding, market makers started removing their hedges and they had to sell their stock positions. While there was some rotation from mega caps to small caps, most of the move was options unwind in the mega caps. Additionally, on the small cap front, most of the move higher was short covering. If you see which small caps went higher, many of those names were heavily shorted and the short squeeze accentuated the “rotation” narrative.
Want more crazy stuff this week? Well two rumors hit semis. Both turned out to be untrue. #1 Xi in China as rumored to have a stroke early in the week. This is untrue. #2 Trading desks started hearing that a Taiwan invasion by China was imminent. Again untrue.
And then there is the pro-Trump trade that markets started selling stuff that was China dependent and the mega caps which are not liked by his team.
So many undercurrents played out this week…one of the most chaotic I have ever seen.
We live in interesting times and as investors we always have to be on our toes sifting through what is real and what is a mirage.
Cheers and have a good weekend!