Move over, Elon Musk, Mark Zuckerberg, Jeff Bezos, Tim Cook, Satya Nadella, and Reed Hastings. The new “top gun” of Big Tech is Jensen Huang, the 61-year-old CEO of Nvidia (NSDQ: NVDA).

Huang is the aggressive and articulate visionary who foresaw, to a greater degree than his Silicon Valley peers, the rapid rise of artificial intelligence (AI). He co-founded Nvidia in 1993 at age 30.

Shares of AI pioneer Nvidia have soared this week, pushing the company’s market cap above $3 trillion, for the first time in excess of Apple (NSDQ: AAPL). Nvidia is now the second-largest U.S. company behind only Microsoft (NSDQ: MSFT).

Even among the “Magnificent Seven” tech behemoths, Santa Clara, CA-based chipmaker Nvidia stands out. Nvidia is now worth more than Amazon (NSDQ: AMZN) and Tesla (NSDQ: TSLA)…combined.

The laggards gain traction…

To be sure, Big Tech has been in the ascendancy this year. However, this surge in mega-cap tech stocks has been accompanied by a notable improvement in market breadth, signaling a more inclusive market rally that now embraces smaller, non-tech companies.

Former laggards are starting to take the lead, contributing to a healthier, more diversified market landscape. Notably, utilities and health care, traditionally considered to be defensive sectors, have been gaining traction as investors expect falling interest rates to spur economic growth.

This improving breadth is reflected in the rise of the New York Stock Exchange Advance/Decline Line (NYAD), as the following chart shows:

It’s also bullish that the CBOE Volatility Index (VIX), aka “fear index,” has plunged below 13, well below the bearish threshold of 20.

Fueling this rally has been increasing optimism over monetary policy. Recent economic indicators, such as softening labor market data and favorable inflation trends, suggest that the Federal Reserve will be inclined to cut interest rates in the coming months.

Market analysts, referencing the CME FedWatch tool, anticipate two rate cuts by the Fed this year, likely in September and December. Supporting this outlook, the Bank of Canada this week initiated its first rate cut of the cycle, reducing its benchmark rate by 0.25% from 5.0% to 4.75%, ahead of the U.S. central bank.

The European Central Bank followed suit on Thursday, dropping the central bank’s key rate for the 20-nation euro zone to 3.75%, down from a record 4% where it has been since September 2023.

The U.S. economy is decelerating but not lapsing into recession. The U.S. ADP private payrolls report released Wednesday fell short of expectations. In May, 152,000 jobs were added, missing the forecast of 175,000 and down from April’s 188,000 new jobs.

The ADP report highlighted a significant decline in manufacturing jobs and a slowdown in leisure and hospitality sectors. Goods-producing jobs contributed just 3,000 new positions, while the majority of gains came from service-providing jobs, which added 149,000 new roles.

Additionally, the report showed a deceleration in wage growth, with job-changers experiencing a 7.8% year-over-year increase, down for the second consecutive month, and job-stayers seeing flat wage growth at 5.0% for the third month in a row.

This data suggests the labor market is stabilizing after a period of robust post-COVID growth characterized by high demand and limited labor supply. The current trend indicates an improvement in labor supply alongside a reduction in demand, potentially leading to further moderation in wage gains and a slowdown in services inflation.

The evolving dynamics of the stock market, marked by the dominance of mega-cap tech stocks and the rising prominence of smaller, non-tech firms, reflect a broadening rally that should provide a more balanced and sustainable growth trajectory.

The ingredients for an extension of the current rally are in place. However, markets are never a straight line, and a pause to digest recent gains could be on the horizon, especially if we get a nasty surprise from forthcoming economic data.

For the time being, the new alpha dog of Wall Street is Nvidia’s CEO. Valuations are stretched, though, and a temporary pullback in the tech sector as well as the broader market would be healthy. Don’t get complacent; stay diversified.

On Thursday, the main U.S. stock market indices closed mostly lower as follows:

• DJIA: +0.20%
• S&P 500: -0.02%
• NASDAQ: -0.09%
• Russell 2000: -0.70%

The benchmark 30-year U.S. Treasury yield slipped 0.25% to settle at 4.43%.

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John Persinos is the editorial director of Investing Daily.

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