A Market Rotation Is Underway As Capital Begins To Leave The AI Trade | New Harbor Financial

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**John Lodra** (1:00)
There is a shifting of some of the sector leadership that we think is not just a temporary blip here. It seems to be a durable kind of rotation that is likely going to play out over several weeks and months.

**Adam Taggart** (1:21)
Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart, welcoming you here for a very special Thanksgiving week edition of the monthly macro and markets update from the gentleman at New Harbor Financial. This is one of the financial advisory firms that Thoughtful Money endorses. You see these folks with me on the channel every week. I'm joined as usual by John Lodra and Mike Preston, the lead partners there. Gentlemen, thanks so much for joining me, and happy Thanksgiving.

**John Lodra** (1:48)
Same to you.

**Mike Preston** (1:49)
Thank you.

**John Lodra** (1:50)
Same to you. Glad to be here. Thanks for having us.

**Adam Taggart** (1:53)
All right, guys. Well, look, a lot's going on. So we don't have a ton of time here, given that it's a shortened week, both in terms of the recording studio time we have here, but also just the markets are only open for about half a week. So let's dive right into it. Okay. So let's pick up where last week ended.
We had a pretty notable reversion in the market last week with Nvidia. The markets had been kind of slouching. A lot of doubts were beginning to emerge in the mainstream financial press headlines about the sustainability of the AI trade. And everybody was looking towards Nvidia to kind of save the day, as it pretty much always has over the past couple of years. And Nvidia did what it always does. It released just gangbusters performance. It upped its forecast. So really just another one of these sort of fantastically good earnings results. And as Wall Streeters want to do, it reacted immediately and aggressively to that good news. It sent Nvidia up by about 5% I think in the aftermarket. So when the market opened the next day, stocks jumped. Nvidia was up 5%. Actually, I think it got up to more like 6% in the early trading. But then the momentum quickly wore off. And throughout the rest of the day, Nvidia kept sinking and then it actually went negative and it closed down about 3% for the day. And there was a lot of consternation on Wall Street, a sense of like, oh my goodness, are we watching the peak of the AI bubble get put in in real time here? And a lot of hand-wringing going into this past weekend. This week, the markets have recovered a bit, a little bit, not a ton. So I'd love to get your guys' thoughts on that, which is, hey, was last week maybe a seminal turning point in the market? That said, I got a note here that it looks like the baton may be being handed off. While Nvidia is still a little bit weak here, Google is just on fire. And it's been on fire for a while, but this week it's really gone bananas. And a large part of the news driving that is Google's new chips, and Google is emerging as a chip competitor here to Nvidia. And one of the things about Nvidia is that it's kind of been like this, in this peerless category where just nobody could compete with it. And all of a sudden, it seems like there might be another, we might have a real horse race going on here. So why don't we start with this? Guys, how important is this? Which things are you watching most closely? What do you expect to happen next from here? John, you've been nodding a lot as I've been saying this. So why don't we start with you?

**John Lodra** (4:42)
Yeah, great. Thank you, Adam. Yeah, Nvidia has been obviously a bellwether stock for as long as all of us can probably remember. And it has been raising some eyebrows of late. And you've rightly pointed to the kind of recent arms race of sorts between Google and Nvidia in terms of the chips and who's going to steal market share or keep market share. And let's look at a chart because we always bring it back to the data here. So this is a daily chart of Nvidia. Sorry for the busy chart. I realize these dotted lines are residual from a working case study that I had with a prospective client that owns a very large concentrated position in Nvidia. They're actually worried about the stock position, but they've got large gains. So what these bars are, they were a hypothetical kind of collar hedge that we were talking about with this prospective client to basically allow them to kind of continue to string out the capital gains, but at the same time protect the downside and still have some upside potential. So I apologize for the busy chart, but the daily turnaround you spoke of is right here. This is the bar for last Thursday, which I think was the, I forget the date, the 20th maybe of November. And you can see we had a massive reversal, popped in the after hours the day before on strong earnings beat. It had a very notable reversal, and it's been a week since then. Here today, we're down about 4% on the day. Stocks at 175 Pretty notable intraday reversal here, but this is what happens when, you know, there's been a bit of narrative about AI in general, but certainly regarding Nvidia. And I don't know certainly any better than the next lay person as to truly what Google's chips may or may not do compared to Nvidia's. But in some ways, it doesn't matter, because the narrative is starting to change a little bit. And that oftentimes can be all that takes hold of price. And that's why at the end of the day, narratives and, you know, my chip is better than yours doesn't matter so much as the price action. And we're seeing, you know, Nvidia should be quite weak relative to a broader market. I'll just share a chart of the S&P, just to show you what that's done. So, Nvidia is, you know, still healthy below its 50-day moving average, as just one metric, whereas we've had a pretty sharp bounce in the S&P. This is SPY ETF that tracks the S&P 500 Had a pretty sharp bounce here. We're back above the 50-day, which is this green line, and actually I've poked above the 21-day moving average.