Was this a buy-the-dip reaction? Or a belief that Democrats won't be able to strangle AI and slow the US economy? Markets began the week with a different mindset. The S&P 500 shrugged off the midterms, last Thursday's massive sell-off, and even the spy scandal involving NVIDIA's CEO. The broad index produced its best performance since April, and investors are drawing parallels with other episodes—most notably spring 2025, when US equities ignored Donald Trump's tariffs and launched a sharp rally.

Daily S&P 500 performance

All 11 sectors led by Industrials were higher. Yet the NVIDIA scandal failed to drag down the Philadelphia semiconductor index. The disconnect between their paths is the largest on record. The company that a few weeks ago aimed at a $6 trillion market cap now sits around $4.3 trillion. A $1.6 trillion loss over the past 24 days is a record. Comparable $1 trillion episodes have occurred with Apple and SpaceX.

The gap between the daily trading performance of the S&P 500 and NVIDIA is unprecedented. In the market's history, there have been only three prior instances when a stock fell by 4% and above, while the broad index rose by 2% and more, the last in May 2009, when the chipmaker's market cap was a modest $5 billion. Today, NVIDIA represents an eye-watering 6.7% share of the US equity market.

NVIDIA versus SOX dynamics

Even if Jensen Huang fights to remain CEO after the spy allegations, a board probe could lead to a leadership change. Tighter controls on chip sales to China are another clear risk. In any case, the company's path has diverged from the S&P 500's, which is one more reminder that a single issuer, even a dominant one, is not the market.

Investors were more troubled by the prospect that Democrats might undermine the US economy by banning the construction and commissioning of data centers, a factor that contributed to the S&P 500's record capitalization loss on Black Thursday, November 5. That narrative is turning into a meme. It's absurd to assume the new Congress will cut the branch that supports the US economy.

While the AI trade may be shifting from "show me" to "prove it," investors are demanding evidence of investment efficacy; it's too early to call a bubble pop. Especially given that the labor market and the US economy remain resilient, and slowing inflation could reduce the Fed's need to raise rates further.

Technically, the daily S&P 500 chart shows a bullish reaction to an inside bar. Long positions opened near the bar's peak around 7,445 have proved correct. A fresh high above 7,575 would justify adding to long positions.