The stock market is not based on income. It’s based entirely on speculation.
Since then, shares of the maker the high-grade computer chips that AI laboratories use to power the development of their chatbots and other products have come down by more than 22%.
June 18th: $136
August 4th: $100
August 18th: $130 again
now: $103 (still above 8/4)
It’s almost like hype generates volatility. I don’t think any of this is indicative of a “leaking” bubble. Just tech journalists conjuring up clicks.
So why did $NVDA have larger swings? It has to do with the concept called beta. High beta stocks go up faster when the market is up and go down lower when the market is done. Basically high variance risky investments.
Why did the market have these swings? Because of uncertainty about future interest rates. Interest rates not only matter vis-a-vis business loans but affect the interest-free rate for investors.
When investors invest into the stock market, they want to get back the risk free rate (how much they get from treasuries) + the risk premium (how much stocks outperform bonds long term)
If the risks of the stock market are the same, but the payoff of the treasuries changes, then you need a high return from stocks. To get a higher return you can only accept a lower price,
This is why stocks are down, NVDA is still making plenty of money in AI
We taking about bubbles or are we talking about balloons? Maybe we should change to using the word balloon instead, since these economic ‘bubbles’ can also deflate slowly.
The stock market is not based on income. It’s based entirely on speculation.
June 18th: $136 August 4th: $100 August 18th: $130 again now: $103 (still above 8/4)
It’s almost like hype generates volatility. I don’t think any of this is indicative of a “leaking” bubble. Just tech journalists conjuring up clicks.
Also bubbles don’t “leak”.
The broader market did the same thing
https://finance.yahoo.com/quote/SPY/
$560 to $510 to $560 to $540
So why did $NVDA have larger swings? It has to do with the concept called beta. High beta stocks go up faster when the market is up and go down lower when the market is done. Basically high variance risky investments.
Why did the market have these swings? Because of uncertainty about future interest rates. Interest rates not only matter vis-a-vis business loans but affect the interest-free rate for investors.
When investors invest into the stock market, they want to get back the risk free rate (how much they get from treasuries) + the risk premium (how much stocks outperform bonds long term)
If the risks of the stock market are the same, but the payoff of the treasuries changes, then you need a high return from stocks. To get a higher return you can only accept a lower price,
This is why stocks are down, NVDA is still making plenty of money in AI
I mean, sometimes they kinda do? They either pop or slowly deflate, I’d say slow deflation could be argued to be caused by a leak.
I’ve never seen a bubble deflate, but I digress.
We taking about bubbles or are we talking about balloons? Maybe we should change to using the word balloon instead, since these economic ‘bubbles’ can also deflate slowly.
Good point, not sure that economists are human enough to take sense into account, but I think we should try and make it a thing.
Its all vibes and manipulation