Nvidia is leading a stock market rally that's defying gravity.
Despite doom-and-gloom headlines fueling geopolitical and economic uncertainty, investor optimism is creating market bullishness that's generating impressive buying demand for market leaders. "(Nvidia stock) is the Mac Daddy, the king of the jungle," Jim Roppel, founder of Roppel Capital Management and founder of the Roppel Report, told Investor's Business Daily's "Investing with IBD" podcast.
Behind the stock market's resiliency is what Roppel calls an "absurdly powerful" backdrop, particularly with the rapid advancement of cutting-edge technologies alongside AI, like cryptocurrency and autonomous vehicles. Roppel says optimism and development around these technologies is allowing stock market participants to overlook broader fears over geopolitical conflicts and tariff-fueled inflation.
"It's hard to beat the golden goose of capitalism," said Roppel. He says even when there are macroeconomic issues and global concerns, innovation and capitalism will persist. "Innovators are like, 'oh there's some type of crises – I'm going to what, stop splitting atoms or writing code?'"
"The human nature is to elevate," Roppel said. "Everyone in the world wants a piece of the pie."
Nvidia, meanwhile, is reasserting itself as an AI leader. The company supplies processors that are critical to how generative AI operates, riding a swell of demand that began around the start of the decade. The chipmaker recently announced additional industry partnerships with AI model builders and with Hewlett Packard Enterprise. Some analysts are calling this a "golden wave" of generative AI adoption.
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But is market breadth still too narrow? There are some downsides to having a stock market rally driven by a handful of significant leaders. For instance, while Roppel says Broadcom appears to have a better technical setup than Nvidia, it is not as critical to the current market as the Jensen Huang-led chipmaker.
"If (Broadcom stock) blew up and went away, the market would carry on," Roppel said.
In contrast, Nvidia stock and its presence in a wide variety of portfolios and ETFs mean the stock's performance carries much more weight. Nvidia also is a supplier to several key Magnificent Seven stocks, including Microsoft, Meta and Google, all of which use Nvidia hardware to power their generative AI efforts.
"If Nvidia blew up, that would be a death blow to the market," Roppel said. "Every cycle has its leader. It's been Nvidia for quite a while."
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