Finimize - 😱 Fear and loathing in the markets

What’s going on here?

Volatility picked up and stock markets fell down on Wednesday, giving investors an uncomfortable feeling of nostalgia.

What does this mean?

When the US sneezes, everyone catches a cold – that’s just what happens with the world’s most sprawling economy. And folks are starting to sense that America’s coming down with a nasty bug. After some weak manufacturing data, investors sent Nvidia’s shares lower by 10% and threw other AI-related firms into a tailspin for good measure. That slide – just weeks after August’s chaotic sell-off – had investors hanging on for dear life: the volatility index (a measure of fear in markets) rose 36%.

Why should I care?

For markets: Stability might not be so far off.

Good economic news is crucial to stabilize markets – it’s what ultimately curbed the August sell-off. And that’s got investors crossing their fingers for some in the US Labor Department’s big employment report due Friday. The main worry is that the economy will slow too dramatically, causing companies’ earnings to fall and stocks to go tumbling. And with all that on investors’ minds, it’s no wonder things have taken a fresh choppy turn.

The bigger picture: The cruelest month.

September is the only page in the calendar with a negative average stock market loss over the past 100 years or so. Since 1928, the S&P 500 has slipped an average of 1.2% during the month, while the other eleven have boasted average gains. And it gets worse: over the last four years, September drops have been between 3.9% and a staggering 9.3%. So, er, bring on October already.

What’s going on here?

Nvidia’s mailbox is usually full of chunky orders and adoration from investors – but this week, the US Department of Justice (DoJ) added subpoenas to the pile.

What does this mean?

The DoJ is seeking evidence to decide whether Nvidia has violated antitrust laws – in other words, used unfair tactics to restrict competition in the market. More specifically, regulators seem to believe that the chip company is making it hard for firms to switch suppliers, and punishing buyers with wandering eyes while rewarding loyal customers with special deals. The DoJ may give Nvidia’s proposed acquisition of RunAI a review, too. Unsurprisingly, the chip industry’s poster child says it’s done nothing wrong, and that it just can’t help having the best products on the market.

Why should I care?

For markets: Money can buy happiness, actually.

Nvidia’s become a vital cog in the supply chain for tech titans like Microsoft and Meta, who drop over 40% of their hardware budgets on its specialized gear. And with a ton of tech companies scrambling to keep up, Nvidia’s sales have been doubling each quarter. In fact, Nvidia's profit this year is set to beat the total sales of its closest competitor, AMD. It’s safe to say that the chipmaker has enough cash to put up a fight, so the DoJ’s probe might not come to anything. But it might not take much for investors to panic. They sent Nvidia’s stock down nearly 10% on Tuesday, after all, spooked by underwhelming US economic data.

The bigger picture: If it wasn’t for you meddling laws...

It’s not just Nvidia: Google, Meta, and Apple have all been pulled aside by regulators recently. So it’s no wonder the biggest names in tech are antsy about the upcoming US election. The next president may be more or less forgiving about the whole “cornering the market” thing – and whoever it is will dictate the handling of social issues that indirectly affect the industry, too.