Is NVIDIA still the market leader?

DJIA 52-wk: +15.24% YTD: +4.70% Wkly: +0.27%

S&P 500 52-wk: +21.82% YTD: +2.70% Wkly: -1.00%

NASDAQ 52-wk: +25.58% YTD: +1.64% Wkly: -1.64%

iShares Semiconductor ETF: 52-wk: +9.71% YTD: +1.23% Wkly: -5.42%

During the week of January 27 to January 31, 2025, U.S. stock markets experienced mixed performance, influenced by significant developments in the technology sector and new trade policies.

Weekly Performance:

S&P 500: Decreased by 0.58%, closing at 6,040.53.

Dow Jones Industrial Average: Increased by 0.39%, ending at 44,544.66.

Nasdaq Composite: Declined by 1.43%, finishing at 19,627.44.

AI Market Disruption: The introduction of China's DeepSeek, a low-cost artificial intelligence model, led to a significant selloff in U.S. tech stocks. Nvidia, a leading chipmaker, experienced a record market-cap loss of $593 billion due to concerns over its competitive position. reuters.com

Trade Policy Announcements: On Friday, January 31, the White House announced the imposition of tariffs: 25% on imports from Canada and Mexico, and 10% on goods from China, effective February 1. This news contributed to market declines, with the S&P 500 falling by 0.5%, the Dow Jones Industrial Average by 0.8%, and the Nasdaq Composite by 0.3% on that day. apnews.com

Sector Performance:

Technology: The sector faced challenges due to the emergence of DeepSeek, leading to significant losses for companies like Nvidia.

Consumer Staples and Health Care: These sectors saw gains, with Consumer Staples rising by 1.97% and Health Care by 2.03% over the week. lpl.com

Looking Ahead:

Investors are closely monitoring the impact of the newly announced tariffs on international trade and the potential for further developments in the AI industry. The mixed performance of the markets reflects ongoing uncertainties in these areas.

BROAD SELLING:

75 percent of the stocks in the S&P 500 closed lower. Technology and energy companies accounted for a large share of the declines.

Is considered the poster child for the A.I. frenzy, fell 3.7% on Friday, and dropped 15.8% for the week.

Apple iPhone Sales Dip. AI Features Still in Early Days.

Apple reported a dip in iPhone sales in the first quarter as artificial intelligence software expected to lure upgrade demand and new customers is still in its early days. The sales were below expectations, as was revenue from Greater China.

Earnings of $2.40 a share and revenue of $124.3 billion beat expectations. But iPhone sales fell 1% and Greater China sales fell 11%, while they rose in the Americas and in Europe, India, and the Middle East. Gross profit margins rose one percentage point to 46.9%.

Apple said its installed base of devices had reached over 2.35 billion, up from previous descriptions. The company is still seeing rapid growth in customers who are new to devices. Over half of iPad and Watch sales in the quarter were to customers new to the products, Apple said.

CEO Tim Cook played up emerging markets, particularly the Middle East and India, the second largest smartphone market in the world. Cook confirmed reports Apple would be opening new stores in India and the United Arab Emirates, and that the online Apple Store was coming to Saudi Arabia.

Apple Intelligence, the new AI software, isn’t available everywhere, but iPhone demand is stronger where the software is live, Cook said. Apple Intelligence went live in October, but not globally. Bullish investors believe that a full launch could boost demand for Apple devices.

What’s Next: Apple is expected to spend $10.7 billion on artificial intelligence this year, much less than its Magnificent Seven peers. Microsoft is on track to invest about $80 billion this year to build out AI-enabled data centers, while Meta Platforms plans to invest $60 billion to $65 billion this year.

It’s Bananas, but Stock Splits Can Pay Off. Here Are 5 Likely Contenders.

Some smart Wall Street people recently circulated a trading strategy so dumb sounding that it might be perfect for the moment. I’m not recommending it, but I won’t be surprised if it works. Details and stocks in a moment.

Picture a conversation like some I’ve overheard between investing novices. One says they should buy stock in such-and-such company because it’s trading at $750, so it must be doing well, not like that other scraggly stock over there at $30. No, the other says, you’ve got it all wrong. You should buy low and sell high—go for the $30 stock and unload it when it hits $750.

You can kind of see where both are coming from. If we were talking about sport coats or smartphones, the higher price might signal better quality. Also, maybe the $750 stock is a big recent gainer that really is doing well. But maybe not. Regeneron Pharmaceuticals, at a recent $682, was down 28% over the past year, while Adobe (ADBE) - 1.92%, at $446, was down 30%.

Anyhow, experienced investors know that share prices are arbitrary things. Companies can make them up when they go public and then adjust them every so often through stock splits or, if things go sour, reverse splits. What really matters are factors like the overall value of the business, the debt and cash flows, and the prospects for things to get better or worse.

As for “buy low, sell high,” I think of it as an un-truism. Truisms are correct but unhelpful—it is what it is. With stocks, most trades every day represent two parties disagreeing about whether an issue is low or high. It’s difficult to tell.

Moreover, stocks tend to rise over time. Index investors have made out beautifully over the decades by buying high and holding out for higher. A less pithy but more useful mantra might go something like: Buy often, and ideally, hold until it’s someone else’s problem, because you’re either dead or rich enough to give it away.

But forget all that. At the moment, the first person might be right—the one who wants to buy the $750 stock. This is judging by three recent observations by the research investment committee at BofA Securities.

No. 1: More stocks than usual are splitting. There were 17 split announcements last year in the S&P 500 SPX -0.50%, including Nvidia NVDA -3.67%, Broadcom AVGO +2.60%, Walmart WMT -0.50%, and Chipotle Mexican Grill. That’s the most since 2013. If that doesn’t sound like a lot, it’s because using a longer lens, it isn’t. It’s a large portion of the 44 splits we’ve seen over the past five years, but nothing compared with the 364 splits over the five years that ended when the dot-com stock bubble popped in 2000. There’s reason to suspect that splits will become more popular from here, however, because…

No. 2: Stock splits are leading to big returns. Since 1980, stocks have returned an average of 25% over the year following split announcements, versus 12% for the S&P 500. Last year’s class of splitters has done even better, returning 17% in six months. Also…

No. 3: There are a lot of split candidates. Among S&P 500 companies, 40 trade over $500 a share.

I can think of a few reasons stock splits dried up. Decades ago, trading odd lots, or fewer than 100 shares, could be cumbersome and costly, and buying fractional shares was unheard of. Today, online brokers offer stock trading in dollar amounts, not just share counts. Nominal prices have become less important than ever. Even BofA notes that splits don’t affect fundamentals. Warren Buffett avoids splitting Berkshire Hathaway A shares, recently more than $709,000 apiece, on the belief that the high price attracts only long-term investors. Chipotle said it split its stock 50-for-1 last year in part because it was becoming difficult to award employees with precise amounts of stock.

My hunch is that not splitting shares became Big Tech–fashionable over the years, like alpine vests. But now splits are bringing big gains, and those are fashionable, too, even if the whole thing doesn’t make sense. So, there could be a split-valanche soon, raising the question of who’s next.

Before I get to how to tell that, more disclaimers: Buying stocks strictly for split potential is gimmicky. Don’t do it. Or at least, use caution. May cause rashes, heart palpitations, and irritable bowels. Better to research company fundamentals.

Oh, who am I kidding? Prudent is out of favor. Think of all those sensible-seeming rotations over the past decade-plus that didn’t pan out. Value stocks? Nope.

History suggests that small-caps will gain ground from here, as the economy keeps growing and interest rates hold steady or decline.

Small-caps? Not really. Overseas stocks? Definitely not. You know what’s going great? Gigachad. It’s a memecoin representing, to quote from gigachad.com, “tokenized masculinity.” A sparse splash page there explains that there is “no intrinsic value or expectation of financial return. There is no formal team or roadmap.” It’s up 91,000% over the past year, with a market value of more than $600 million. I’m leaving out some key fundamentals. There’s also a picture of a guy with a beard on the website, and phrases like, “I don’t care, I win.”

So chase splits if you want. I’ll just note that the list of contenders reads a lot like the highfliers that investors are chasing anyway. The biggest commonality among past splitters is that they had rapid price run-ups before the announcements. Starting with $500-plus stocks, and sorting for ones that have done even better over the past one, three, or five years than the average company that decided to split, BofA highlights a handful of names. Netflix stands out, along with Fair Isaac, Eli Lilly, Meta Platforms, and Goldman Sachs Group.

I’m keeping a close eye on NVIDIA and the whole technology sector including Semiconductor stocks.

Financial names in general with a focus on the KRE, XLF & IWM.

Factors I'm focusing on this week:

1) Price action in NVIDIA

2) PMI on Monday

3) Busiest week for earnings. Roughly 120 S&P 500 companies will report Q-4 earnings. Names such as AMD, Qualcomm, Dis & AMZN will release earnings.

4) Friday is the jobs report. Economists forecast a 170,000 increase in nonfarm payrolls.

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DATA: Barron’s print edition page 28 1/27/25 Market Week Paul R. La Monica

Paragraph: one ChatGPT market recap for the week of 1/20/25-1/24/25 As stated above

Paragraph: two Barron’s print edition 1/27/25 page 28 The Trader Paul R. La Monica

Paragraph: three Weekend Wisdom online edition 1/25/25 The AI Boom Continues Ethan Feller

Paragraph: four Mitch on the Markets online 1/25/25 Investors are Becoming More Optimistic. That’s a Warning Sign Mitch Zacks

Paragraph: five Closing remarks Richie Naso opinion

Paragraph: 6 Factors I’m focused on this week Richie Naso