Analysis of SPHQ's decline on April 19, 2024: Nvidia's plunge drags ETF down

On April 19, 2024, the U.S. stock market experienced significant volatility, with AI giant NVIDIA plunging sharply, closing down 10%, directly impacting the net value retreat of related index ETFs heavily invested in NVIDIA.

SPHQ, an ETF that had previously benefited from NVIDIA's gains, was also dragged down by NVIDIA's drop, falling 1.16%.

This sharp decline in NVIDIA actually reflects a recent market release of risks related to AI concepts. Over the past year or so, AI has been the market's main theme, with NVIDIA's stock price consistently above 800.

While AI-related stocks, represented by NVIDIA, have been highly sought after by the market, it's also important to acknowledge the risk of a pullback after a surge. From a longer-term perspective, NVIDIA's monopoly as the "shovel seller" of AI in computing infrastructure is not eternal.

Just like Ericsson and Nokia in the communications industry, they couldn't maintain their leading positions forever.

Now, whether it's Google, Microsoft, Meta, or Tesla, all are researching computing chips tailored to their vertical fields. Some chips from Tesla and Google are already being pushed toward mass production.

Additionally, the trigger for NVIDIA's sharp drop on April 19 might also be TSMC's new earnings guidance. In TSMC's Q1 report, while they remained optimistic about AI, trends in automotive electronics, consumer electronics, and PCs showed a downward trajectory. This has raised market concerns that declining end-consumer demand might indicate a slower-than-expected economic recovery.

Of course, SPHQ's decline wasn't solely due to NVIDIA; other holdings also performed unevenly. Recently, major companies have released their Q1 2024 earnings reports, showing mixed results amid a slow economic recovery. While most companies exceeded market expectations, a few reported bombs.

The Fed remains cautious about the future, as current inflation levels are still unacceptable, suggesting that high interest rates may persist for quite some time.

Last week, the Nasdaq had its worst performance since the Silicon Valley Bank incident in March 2023. Therefore, SPHQ's pressure may continue for a while.$Ps S&P 500 Qlty Port(SPHQ.US)