The blunt truth on Nvidia, the ‘Magnificent 7,’ and markets

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Bull markets often carry with them great expectations about future growth.

Sometimes those expectations by the investing masses are too lofty given fresh incoming realities.

I fancy that is the case today as we get ready to enter a firehose of news over the next month that could inject renewed volatility into markets.

Emanating from that firehose includes the potential for market-moving social media posts by President Trump, immediate tariffs on countries like Mexico and Canada, and a late January Federal Reserve meeting where another rate cut is probably not in the cards (which may draw more market-moving social media posts from said president).

“You could look at [hot] names like Palantir, Tesla, some of the sell-offs that we’re seeing — I think broadly we’re just going to see some white knuckles in the next six months,” Wedbush analyst Dan Ives told me on Yahoo Finance’s Opening Bid podcast (see video above; listen below). “Trump headline risk, tariffs, 10-year Treasury as it goes to 5%, and what does it mean for Fed [are all risks] — and so I think we’re going to see some of that [volatility].”

Case in point: The markets plunged on Friday after December’s job report blew past expectations, with 256,000 jobs added, compared to estimates of 155,000. The S&P 500 (^GSPC) dropped 1.5%, and the Dow Jones Industrial Average (^DJI) and Nasdaq Composite (^IXIC) each lost 1.6%. The 10-year Treasury yield (^TNX) continued a recent uptick, as investors prepared for a higher-for-longer rate environment.

Prior to Friday, the market had already begun to experience twitches in areas that had been leaders of the bull market.

Investors were left yearning for more from Nvidia (NVDA) CEO Jensen Huang’s CES keynote on Monday evening. In response, the stock notched its worst day since Sept. 3 on Tuesday.

Nvidia’s stock is down by 11% since its Jan. 6 intra-day high.

Other richly valued momentum names (known as “momo” trades) such as Palantir (PLTR) and AMD (AMD) have sold off more than 10% in the past month as traders price in a more elevated interest rate backdrop, a stronger US dollar, and increased headline risks.

The risk-off tone has extended to the crypto patch too.

Bitcoin (BTC-USD) is trading at levels not seen since November and is off by about 15% from its record highs.

Meanwhile, the Street has come out of the gate this year slapping downgrades on the stocks of longtime favorites such as Apple (AAPL).

The sell-offs in momo names and crypto have coincided with a rotation into more defensive areas of the market, possibly as investors prepare for greater volatility.

The iShares US Healthcare ETF (IYH) and SPDR Gold ETF (GLD) have each outperformed the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) year to date.

This week, Goldman Sachs went so far as to say the markets may be headed for a needed correction, crushed under the weight of lofty valuation and over-concentration in “Magnificent Seven” stocks. Where does Goldman see the best near-term opportunities?

Defensive sectors of the market.

“We think there are attractive opportunities in quality compounders across markets that are outside of the technology sector. Many of these companies are relatively defensive and have suffered more from rising interest rates than megacap technology,” Goldman Sachs strategist Peter Oppenheimer said.

Others on the Street agree the path forward for markets could be rockier.

“The weight of the evidence suggests the primary market trend remains higher, driven by a resilient economy supporting solid earnings growth near 10% in 2025,” Truist co-chief investment officer Keith Lerner wrote in a client note. “Yet, investors should anticipate a bumpier path relative to last year, which should provide tactical opportunities.”

Buckle up, folks.

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram and on LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com. Three times each week, Sozzi fields insight-filled conversations with the biggest names in business and markets on Yahoo Finance’s Opening Bid podcast. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.