- Nvidia’s (NVDA) stock fell 2.71% to $126.75 as Sarat Sethi on CNBC’s ‘Power Lunch’ predicted a post-earnings pop, citing reduced short interest (from $280 million to $260 million shares) and technical support, despite bearish signals from ETFs like SPY, IWM, and QQQ.
- Sethi highlighted Nvidia’s 70% index fund ownership, making it a market proxy for hedging rather than a direct short, reflecting a shift from concentrated bets five years ago to a risk management tool in today’s uncertain climate.
- He noted broader market turbulence – bond ETFs showing inflation versus efficiency battles, and sell-offs in China ADRs, component makers, and non-U.S. carmakers due to tariffs – emphasizing data-driven short interest trends as key to interpreting a potentially bearish marketplace beyond Nvidia’s earnings.
Nvidia’s (NVDA) shares dipped $3.53, or 2.71%, to $126.75 in Tuesday trading, a subtle shift that belies the weighty discussion Sarat Sethi, managing partner at DCLA, brought to CNBC’s ‘Power Lunch’ about the chipmaker’s looming earnings and its outsized role in the market. Sethi framed Nvidia as a paradox for investors, its market cap surpassing that of nearly every country except Japan and its 70% index fund ownership making it a proxy for the broader market, where short interest – now hovering between $260 million and $280 million shares – serves as a tool for hedging the entire landscape rather than a bet against the company itself. He anticipates a post-earnings pop, driven by declining short interest and technical support levels, even as broader ETFs like SPY, IWM, and QQQ flash bearish signals, suggesting a short-term lift amid a gloomy market backdrop.
Sethi’s analysis digs deeper into the evolving nature of market dynamics, noting a departure from the concentrated hedge fund blowups of five years ago—today’s short interest in Nvidia reflects a risk management strategy, not a verdict on its fundamentals, a shift cemented by its status as a marketplace bellwether. He acknowledged Mizuho’s Jordan Klein’s view that Nvidia’s earnings might lack punch given weak performances from software and AI energy names, agreeing that broader data points matter, yet he still sees Nvidia’s short-term action hinging on short interest trends—declines and coverings off resistance levels signaling a bullish blip. Beyond tech, Sethi spotlighted turbulence in bond ETFs like TLT, with inflation hitting the long end and efficiency lifting the short end, alongside sell-offs in China ADRs, component manufacturers, and non-U.S. carmakers amid tariff uncertainty, painting a market ruled by short-term cues.
Nvidia’s $3.2 trillion valuation and 152% revenue growth underscore its dominance, but Sethi’s take pivots on data as the linchpin—short interest movements and market beta revealing a cautious investor base mimicking indices to dodge risk, a dynamic that could spell broader bearishness despite Nvidia’s expected bounce. The stock’s 5.5% year-to-date dip aligns with this jittery climate, yet Sethi’s focus on technicals and ownership structure offers a nuanced lens: Nvidia’s earnings could spark a fleeting rally, but the real story lies in a market wrestling with inflation, efficiency, and global trade tremors, where the chip giant’s moves are less about its own fate and more about signaling the herd’s next step.
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