Note for Paid Subscribers: The allocation of the ARTAIS AI-themed model has changed. Please see “The Current Allocation” section at the end of this article
Well, a potentially big event is unfolding in the tech space.
Nvidia’s CEO, Jensen Huang, got caught cheating on his wife with not one, but two women. One is a current employee (VP of healthcare), and the other is an alleged Chinese spy.
The Nvidia CEO has been on the front line of the AI cycle, and whether he is forced out, stays in control of the firm he started from a Denny’s in 1993, or takes a new role akin to Bill Gates stepping down from Microsoft in 2000, in which he transitioned to the role of Chief Software Architect (Gates remained Board Chair, a position that does not exist at Nvidia), has yet to be determined.
Update: He resigned:
source: WSJ
While the news of the affairs was obviously not great news for Nvidia shareholders:
But the timing is interesting within the AI theme.
Will The Event Mark a Change in Trend?
Tech stocks, especially those in the AI theme, have seen steep declines this year. Everything from lending worries to data center pushback has negatively affected the AI theme:
In my 30+ years of managing money, I have noticed that when there is a large sell-off in a theme, the bottom is usually marked by an “event”.
In the past, we’ve often seen these events marked by a magazine cover, aka the contrarian magazine cover indicator. For example, covers from The Economist magazine caught the major turns in oil from 1999 to 2016:
Source: Spectra Markets
As a student of the markets, I find the magazine cover indicator to be fascinating. These covers often reflect the peak news cycle within a theme. (This is when the topic starts being discussed at cocktail parties.)
Fidelity actually has a section within its infamous chart room dedicated to this concept:
Source: Josh Brown
The theory behind the magazine indicator is that all the good or bad news is already priced in. Not just for those of us who watch the market daily, but for everyone, as the magazine cover has now informed investors who don’t normally pay attention to day-to-day market moves.
So, if everyone has a bearish (or bullish) opinion on where a theme's next move is, they have likely already adjusted their portfolio accordingly. Meaning, there is now a lack of sellers (or buyers) to continue the current trend lower (or higher).
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