Thijs Knaap, chief economist at APG, discussed the turmoil surrounding NVIDIA and the reaction of investors to the US midterms in the Investor Panel of BNR Zakendoen.
The reason was the news about NVIDIA CEO Jensen Huang. The NVIDIA share fell sharply as a result. Knaap mainly looks at the underlying investment risk. "This is a story about concentration risk," he says. According to him, NVIDIA represents 6.3 percent of the S&P 500. "That's huge. And that means that one company can cause a kind of index-level event if its top executive does this kind of trickery."
Built from the ground up
In addition, NVIDIA is heavily dependent on Huang. According to Knaap, the CEO is said to have built the company from the ground up and set it up in such a way that no one is ready to succeed him just like that. "It would be irresponsible to send him out now. That is actually a situation that NVIDIA itself should not have gotten into, that they have become dependent on that key person who is at the helm there." He also sees this vulnerability in other large tech companies, where one person occupies an exceptionally important position.
The US midterms also caused movement in the stock markets. After the election results, chip companies in particular fell hard, partly due to concerns about possible restrictions on the construction of data centers. Knaap puts that price movement into perspective. "It's a bit like the familiar roller coaster: first up, then hard down on Thursday, not so much on Friday and decent recovery yesterday." According to him, the MSCI World was already at about the level of before the elections.
Nervous
Beneath the surface, however, the differences are large. Chip manufacturers had not yet fully recovered their losses, while companies that already have a lot of data center capacity benefited. "Amazon, Apple and Microsoft are all higher since the elections," says Knaap.
According to him, the volatility also shows how nervous investors are about the high valuations around artificial intelligence. "You do notice that people are waiting for it, that investors think: would it happen now?" Yet Knaap does not yet see a fundamental change. "The business figures are actually still very good. The underlying fundamentals are not so rotten that the whole castle just collapses." His conclusion: "It was a kind of mass psychology, but at the same time the theme of AI is not yet over."