Evercore ISI argued in a Wednesday note to clients that Nvidia (NASDAQ:) is no longer the linchpin of the stock market, despite its remarkable post-earnings rally.
Following Nvidia’s earnings report on May 22, the AI stock surged nearly 20% in three days, a move that historically would have lifted the . However, this time the S&P 500 remained down, marking an unprecedented decoupling.
“While there have been several instances of “important” stocks such as Apple Inc (NASDAQ:), Tesla Inc (NASDAQ:) or NVDA rising 20% in 3 days, either the shares were not yet a top 5 weight stock in the S&P 500 or those rallies moved the S&P 500 higher in tandem,” Evercore analysts wrote.
“SPX never down simultaneous to a 20%+ advance after an Earnings release,” they added.
The divergence is particularly striking given Nvidia’s high correlation with the S&P 500, which stood at 0.95 over the past year, and happening on May 28, when the implied correlation among large-cap stocks tumbled to 12.04, among the lowest in history.
This, according to Evercore, further reinforces the notion of a “stockpicker’s market.” Historically, such troughs in correlation have led to significant market corrections, yet the recent period has been an exception.
The 3-day surge of NVDA while the S&P 500 fell “is a catalyst for greater movement at the S&P 500 level ahead of other event catalysts,” continued Evercore analysts. These catalysts include the upcoming Trump trial verdict, core PCE inflation report, Nvidia’s stock split, CPI report, and the FOMC meeting next month.