Shares of NVIDIA (NVDA), which have been following, or perhaps driving, the overall direction of the market, had a particularly rough week after staging a late-August recovery in which they once again approached all-time highs.
NVDA was down 13.9% this week, which contributed significantly to the broader weakness in the indices.
News reports began to surface early in the week of a Justice Department investigation of NVDA, possibly involving subpoenas. They are apparently looking at a range of issues as they try to understand NVDA’s enormous market share and immense profitability within the data center Graphic Processing Unit (GPU) market.
It is not surprising to us that antitrust authorities are knocking on NVDA’s door. The company is expected to generate more than $80 billion of operating profit in the current fiscal year, with operating margins around 65%. NVDA has immense market power. The question is whether or not all of it has been lawfully obtained.
As we addressed in our Livestream broadcast today, the stock market is now in an interesting spot. A Fed pivot towards lower interest rates is broadly helpful for stock valuations, in two major ways. Companies will be able to borrow money at lower interest rates, and earnings multiples may rise as bond alternatives become relatively less competitive.
