Amid the usual corporate earnings and back and forth markets, you would be forgiven for not knowing why February 2024 was such an interesting, record-breaking month in the history of the stock market.

 

Only 2 days into the month, Meta (formerly Facebook) set a new all time record for the largest single day market-cap gain in stock market history after reporting strong quarterly earnings. The market cap of a company is the number of shares multiplied by the stock price. For example if there are 1000 shares of a company trading on the market, and the stock price goes up $20, the market cap has increased by $20,000 (1000 shares x $20 increase). In Meta's case, their market cap rose by $197 Billion US dollars in one day.

 

But this record only lasted 20 days, until Nvidia posted a massive Q4 2023 earnings beat. This sent the stock to new all-time highs and added a whopping $247 billion US dollars in market cap - in one day. Nvidia's earnings have largely been driven by demand for its Artificial Intelligence chips like the H100 Tensor Core GPU. You may or may not believe in the future potential of AI, but the markets obviously place a high value on these new technologies.

 

The top ten single day market cap gains in history are all from big US tech (Nvidia twice, Meta once, Apple four times, Microsoft twice and Amazon once). Just 7 companies now account for roughly 30% of the S&P 500s total market cap of about $45 trillion.

 

As these companies move into the pantheon of mega-corporations, it begs the question - to what extent is the return of the US stock market now tied up in the potential of just a handful of companies?

 

Apple, Microsoft, Nvidia, Tesla, Meta, Alphabet and Amazon each outgained the broader market in 2023, but it’s been a mixed bag for the group over the first 2 months of the year, even as indexes sit at record highs. Alphabet (Google), Apple and Tesla have underperformed, while Nvidia, Meta, Microsoft and Amazon have all outpaced the broader market.

 

Corresponding Image Description: Chart showing "Top Ten SIngle-Day Market Cap Gains" Date Range on the X-axis is 2020-2024. the Y-axis shows dollar amount from $0 to $200Billion. 1. Nvidia Feb 22, 2024 $247B. 2. Meta Feb 2, 2024 $194B. 3. Apple Nov 10, 2022 $194B. 4. Amazon Feb 2, 2022 $191B 5. Nvidia May 25 2023 $194B. 6. Apple Jan 28, 2022 $179B. 7. Apple Jul 31, 2020 $169B. 8. Apple Oct 28, 2022 $151B. 9. Microsoft Mat 13, 2020 $150B. 10. Microsoft April 26, 2023 $148B.

 

While it can be enticing to chase these big names, we must be careful not to overly concentrate our hard-earned money in a few companies that are all riding the same wave of AI hype. There are 493 other companies on the S&P 500, many of which have great return potential and better value. Keeping our focus on the bigger picture is the key.

 

Sources:

Thomson One (return data)

Visual Capitalist (market cap data and image)