The star of the movie "The Big Short" bet against semiconductor stocks using the iShares Semiconductor ETF, but think twice before jumping on the same bandwagon.
Just because someone got it right once doesn't mean all of his predictions and actions will always be correct. Since 2017, he has been going about an impending collapse that has yet to happen.
Yes, there may be signs of a possible collapse, such as a bubble in the commercial real estate market, troubled debts in regional banks, overvaluation of technology, etc. But the market always sets its own rules.
Hope Dies Last
There seem to be reasons for a downturn and a full-blown collapse, but the indices are still not falling. The reason is that investors would instead look to an optimistic future than to a gloomy present.
The thinking is this: yes, corporate bankruptcies are rising, troubled debts and delinquencies among the population are rising, but inflation is falling, so the Fed will start lowering rates sooner than expected.
The fact that a mere reversal of the regulator's monetary policy will not solve all the problems seems to worry no one. Or at least, no one realizes the risks yet, acting on the principle of striking while the iron is hot.
The question remains whether this strategy will be successful in the long run or whether, as in the past, a change in the Fed's actions will lead to a recession and a significant market sell-off.
For now, the trend remains powerfully bullish; QQQ is breaking yearly highs, and the indices are moving in the same direction, and it is hard to say what could stop them. One of the last hopes rests on Nvidia's poor results.
The only problem is the high probability that the company will not disappoint.
Will Nvidia be a boost?
Analysts expect the company's total revenue to grow 172% to $16.2 billion and revenue from the data center segment nearly quadruple to $13.02 billion, up from $3.83 billion a year earlier.
On Wall Street, Nvidia's adjusted earnings are expected to rise to $3.37, up from $0.58 in the same quarter last year. The reasons for these numbers remain the same: the company's dominant position in generative artificial intelligence.
The consensus forecast for Nvidia stock is $648.01, and judging by the pre-results optimism, the company's shares could surpass $600. The bottom line is that if Nvidia rises, so will the shares of other semiconductor, AI and related companies.
Opening a short position in the face of such prospects is an extremely risky venture; at the very least, it requires significant capital. Otherwise, you may face a margin call and substantial losses.
Think before you act.
When we see headlines trumpeting the opening of a position by a large investor, it is not worth rushing to imitate them. Firstly, it is unclear exactly when they opened it, and secondly, they can afford to take risks, whereas a small investor might not.
Remember risk management, use technical analysis tools such as a volume indicator to confirm a trend and research before buying or selling anything. It may not make you a millionaire in a few months, but it won't bankrupt you either.
