What happened Friday has some on Wall Street worried that a larger pullback has begun. Nvidia, the AI beneficiary that has boosted markets this year with its supercharged advance, ended Friday's session lower despite hitting an all-time high earlier in the day. The chipmaker lost 5.5% in its worst session since late May, although Nvidia ended the week up more than 6%. But some investors worry that markets could suffer a broader decline without the help of AI names. As it stands, five of the "Magnificent Seven" names fell last week, with the exception of Nvidia and Meta Platforms. Apple shares, for example, fell about 5% during the week. Nvidia, which has added more than $1 trillion in market value this year, is responsible for about 30% of the S&P 500's aggregate gains this year alone, LSEG data shows. That advance has helped the S&P 500 rise for 16 of 19 weeks, making record after record in its climb. The broader index is up more than 7% this year. "Something had to give," BTIG's Jonathan Krinsky wrote in a Sunday note. “Consolidation in AI trading is long overdue, so Friday's key reversal day could signal the beginning of that easing.” NVDA Mountain 5D Nvidia AI Abundance In fact, other market observers warned investors that overreliance on AI beneficiaries this year could spell danger for the broader market. "[If] "The market now relies on Nvidia, AMD and other semi-names as a base, which is much more fragile ground given the significant cyclical nature of that business," wrote Peter Boockvar, chief investment officer at Bleakley Financial Group. "In terms of secular producers and linear trends, there was nothing like the business-creating industry of Google, Apple, and for a time Tesla. AI is just a tool, not an industry-creating one like those mentioned here and the semis will ALWAYS be a boom and bust business.” Meanwhile, Dubravko Lakos-Bujas, chief global equity strategist at JPMorgan, noted that investors flocking to the few quality large-cap tech names with strong balance sheets have caused dangerous dislocations in the market: "Given this relationship , along with very optimistic investor sentiment and positioning, we warn investors that this relationship is likely to work in reverse when AI euphoria peaks," he wrote. in a Sunday note: "While the bullish market beta for NVDA is significant (as well as META and AMZN), the bearish market beta for these stocks is even stronger...which could represent a higher risk of queue for the market.", added Lakos-Bujas. More evidence needed Investors will need to see more evidence of a reversal beyond one-day trading, said BTIG's Krinsky. Wall Street will need to see if this year's underperforming sectors can pick up the slack if mega-cap stocks start to perform. falter, or whether the overall market will fall along with this year's market leaders. On that front, there has been good news for investors. Notably, the small-cap Russell 2000 outperformed last week, closing slightly higher, while the S&P 500 posted losses, indicating that the gains could spread across the asset universe. On Monday, however, the Russell 2000 lagged major benchmarks. "The equally weighted S&P 500 and Value Line Index hit new highs last week, ending long streaks of indifference and speaking to the idea that there is more to do in this market than simply relying on the biggest stocks. "Chris Verrone, head of technical and macro research at Strategas, wrote in a note on Monday. Meanwhile, Goldman Sachs traders wrote Sunday that they are "structurally, still (very) bullish" on the market, even if they are "tactically 'nervous'" about the near-term setup. Krinsky said he expects the risk to be to the downside, at least in the short term. On Monday, at least, all the major benchmarks were last on track to have a losing day. He advised investors to hide in low-volatility stocks. "[The] The argument against a broad rotation is that correlations are at record lows since 2006. So if correlations are about to rise, that suggests a broader sell-off may be near," Krinsky wrote. "Though March came in strong as "A bull, perhaps it will go more like a bear, at least in the short term." — CNBC's Samantha Subin contributed to this report.
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Why Friday’s key Nvidia reversal could mark the start of a broader stock market unwind
