In the ever-evolving landscape of technology and finance, it’s sometimes necessary to change our perspective and examine the broader picture. A prime example is Nvidia (NVDA), a leader in the tech industry. When we zoom out to the weekly charts, we see that NVDA’s gap to the 200-week moving average is notably wide, hinting at underlying market dynamics.

The journey of Nvidia is nothing short of remarkable. Since its public debut on January 22, 1999, the company has seen tremendous growth. CEO Jensen Huang’s 3 million shares, worth $59 million at the IPO, have skyrocketed in value to an astonishing $85.8 billion today. This growth trajectory not only highlights Nvidia’s market success but also underscores the potential of long-term investment in technology.

JPM’s Ron Adler encapsulates the market sentiment towards NVDA and its relation to AI advancements. Starting the year with a significant 20% increase, thanks to reminders from TSM and SMCI about AI’s relevance, NVDA has been a focal point in the tech market. Adler’s statement, “if you aren’t long, you’re short,” reflects the intense FOMO (fear of missing out) surrounding AI stocks, especially after NVDA’s 240% surge last year due to its AI innovations.

As of late 3Q23, hedge funds’ net exposure to the “Mag 7” (a group of dominant tech stocks) accounted for over 25% of their total net exposure. However, a thematic shift towards the year-end saw these funds substantially reducing their long positions, becoming significant net sellers in November. They only repurchased about half of what was sold, leading to a drop in the Long/Short (L/S) ratio for these positions to 9-month lows by year-end.

ETFs with embedded options selling strategies are gaining traction, indicating a shift in investment strategies. Meanwhile, dealers currently hold a ‘long gamma’ position, but it’s important to note that this decreases rapidly with 1-2% moves in the SPX, either up or down.

Citi’s market intelligence sheds light on NASDAQ’s bull run, noting that Nasdaq futures positioning is at near three-year highs. With average position profits nearing 5%, these stretched positions are vulnerable to profit-taking, posing challenges for further upward movement in the market.

A critical point to ponder is the widening gap between technology stocks and interest rates. As the NASDAQ seems to have ‘decoupled’ from rates, the sustainability of this trend is questionable, presenting an intriguing scenario for investors and market analysts.

The tech and financial markets are in a state of dynamic flux, with companies like Nvidia at the forefront. Investors and market watchers must navigate these changes carefully, considering long-term trends, hedge fund strategies, ETFs evolution, and the delicate balance between tech valuations and interest rates. As we continue to witness these shifts, staying informed and adaptable will be key to understanding and capitalizing on these market movements.