Wall Street Frontline｜Peter Tuchman: Clarity out of the Fed(2)

But we saw the stock rally from $740 until $946 on the day of the earnings, right? The earnings came out. They blew it out of the water. And after the close of the market, when the earnings were released, it rallied another hundred points. And we've seen rallies day after day after day since then. I believe it got as high as $1,180. So that shows that the enthusiasm is continuous. The story is a big story. They are the best of breed. There is a secondary and tertiary derivative, which means that the effects of Nvidia on other companies, the overflow into the Microsoft, the Amazons, the Googles, the other people in the AI space are going to be huge. And that's going to be the third and fourth inning. But we are in the beginning of the game when it comes to Nvidia.

Wall Street Frontline: Daniel Ives, he always told us, right now, it's like the 1995 moment.

Peter Tuchman: And not a 1999 moment. It's a great line. So, your audience understands what he means is that in 1995, it was the beginning of the growth of the Internet. In 1999, it was the burst of that bubble. So we're not talking about a bubble burst here. We're talking about a foundational growth with a lot of legs on it and a really good long-term story.

Wall Street Frontline: So what are the main factors driving the rapid growth of Nvidia?

Peter Tuchman: That's not my specialty. The bottom line is, obviously, it's chips. It's AI, the robotics of the world. They are the best. And all the other companies that are trailing in that space are going to need Nvidia to get the exposure they need. So it's not only in itself an amazing company with great products, but it is going to be the motherland of all the other stocks as second and third derivatives in that sector.

Wall Street Frontline: While Nvidia has been, saying like a great significant gains in May after its earnings reports, other big technology companies like Alphabet, like Tesla, they have been down for a while. So what has caused this divergence between Nvidia and other Magnificent 7 companies?

Peter Tuchman: Look, they've got other issues going on. I would think Tesla, obviously, Tesla had a bit of a rough patch. It's had a rough patch and for a number of reasons. You know, at the last earnings report, even though the stock earnings were quite poor, right, they were able to dangle a little bit of a carrot talking about that they were going to get the auto cars green light in China. And then they said that they're going to be fast forwarding a number of the electronic vehicles here in the States. The stock was oversold, way oversold, net for the year. And that's why it rallied. But the story is always overshadowed by the wild card of Elon Musk, I think. And the other problems that the electric vehicle sector has had, you know.

As far as Google and some of the other names, they've had OK runs. They are not Nvidia. You know, we are seeing that within a sector. They are secondary and tertiary derivatives of the AI game. And the only pure AI play is Nvidia. And since AI is where everyone is putting their money and their hope for the future, that's why Nvidia is best of breed. And the rest of them have had an OK time. But they're the ones, if you're going to sell, you're not going to sell best of breed. You're going to sell the third and fourth guy down the road.

Wall Street Frontline: As we enter into the second half of 2024, because today is the last trading day, May 31st, did you notice any notable sector rotations or shifts?

Peter Tuchman: As I said, the Russell 2000 yesterday rallied one or two percent, even though the market itself was down. And so that's a mid-cap, small-cap rise in a big way. I'm not trading a sector, you know, I trade the S&P. That's my specialty. And I will hyper focus things that have a lot of particular interest to me. I think there's a broad-based rally going on that's signified by the Russell. Obviously, tech is still hot. And obviously, Nvidia is the best of breed. I think the broad-based rally that we've seen in May is significant going forward.

We've got another month. The clarity that we need to get from the Federal Reserve about whether we will have one cut or no cuts or a small raise, which is a data-driven decision, we don't know the answer. Today, the PCE number came out. It was not a good one, but it was not something we didn't expect. Markets can accept anything as long as their expectations are not disappointed. And we were told it was going to be plus 0.3. It came in at plus 0.3. So we were given what we were promised.