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The air begins to leak out of the overinflated AI bubble (www.latimes.com)

submitted 3 months ago by [email protected] to c/[email protected]

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[–] [email protected] 12 points 3 months ago (1 children)

The broader market did the same thing

https://finance.yahoo.com/quote/SPY/

$560 to $510 to $560 to $540

So why did $NVDA have larger swings? It has to do with the concept called beta. High beta stocks go up faster when the market is up and go down lower when the market is done. Basically high variance risky investments.

Why did the market have these swings? Because of uncertainty about future interest rates. Interest rates not only matter vis-a-vis business loans but affect the interest-free rate for investors.

When investors invest into the stock market, they want to get back the risk free rate (how much they get from treasuries) + the risk premium (how much stocks outperform bonds long term)

If the risks of the stock market are the same, but the payoff of the treasuries changes, then you need a high return from stocks. To get a higher return you can only accept a lower price,

This is why stocks are down, NVDA is still making plenty of money in AI

[–] [email protected] 1 points 3 months ago* (last edited 3 months ago) (1 children)

There's more to it as well, such as:

investors coming back from vacation and selling off losses and whatnot
investors expecting reduced spending between summer and holidays; we're past the "back to school" retail bump and into a slower retail economy
upcoming election, with polls shifting between Trump and Harris

September is pretty consistently more volatile than other months, and has net negative returns long-term. So it's not just the Fed discussing rate cuts (that news was reported over the last couple months, so it should be factored in), but just normal sideways trading in September.

[–] [email protected] 1 points 3 months ago (1 children)

We already knew about back to school sales, they happen every year and they are priced in. If there was a real stock market dump every year in September, everyone would short September, making a drop in August and covering in September, making September a positive month again

[–] [email protected] 2 points 3 months ago (1 children)

It's not every year, but it is more than half the time. Source:

History suggests September is the worst month of the year in terms of stock-market performance. The S&P 500 SPX has generated an average monthly decline of 1.2% and finished higher only 44.3% of the time dating back to 1928, according to Dow Jones Market Data.

[–] [email protected] 1 points 2 months ago (1 children)

S&P 500 up this September officially

[–] [email protected] 2 points 2 months ago (1 children)

Woo! We're part of the 44% or so. :)

[–] [email protected] 2 points 2 months ago

45% now since the data only goes back 100 years