Alphabet nears $4 trillion market cap as position in AI race grows stronger

Key Concepts

• Alphabet's Recent Performance: Compared to Nvidia's past trajectory, with significant year-to-date gains.
• Market Capitalization: Discussion of Alphabet and Nvidia reaching $3 trillion and Alphabet's potential to reach $4 trillion.
• Stock Performance Comparison: Alphabet vs. Nvidia (3-year and year-to-date), and Alphabet vs. Broadcom.
• Market Correction Stability: Alphabet's sideways movement during a recent market correction, indicating stability and strong buying interest.
• Seasonality: December market trends, including historical performance of the S&P 500 and small caps, and the potential for a year-end rally.
• Consolidation: Expectation of consolidation in the first half of December, followed by a potential rally.
• Historical Market Events: Mention of the 2018 December market downturn.

Alphabet's Trajectory and Market Performance

The video highlights Alphabet's recent performance, drawing a parallel to Nvidia's trajectory from a couple of years ago. Data presented shows that yesterday, Alphabet was up 6%, and Broadcom was up 11%. In pre-market trading, Nvidia was down approximately 4.52%, while Alphabet was up another 3.69%, and Broadcom saw a similar increase.

Comparative Stock Performance:

• Nvidia vs. Alphabet (3-Year): Nvidia has surged by 1,000%, significantly outperforming Alphabet's respectable 223% gain.
• Nvidia vs. Alphabet (Year-to-Date): Both stocks showed a similar trajectory until recently. Alphabet is now up almost 70% year-to-date, while Nvidia is up around 35%.
• Alphabet vs. Broadcom (Year-to-Date): Alphabet is slightly outperforming Broadcom, with Alphabet at 68% and Broadcom at 63%. Broadcom is described as also "going Nvidia."

Market Capitalization Milestones

The discussion focuses on Alphabet and Nvidia reaching a $3 trillion market capitalization. The presenter adjusted the timelines so that both companies hit $3 trillion on the same day. Following this milestone, Alphabet has surged and is approaching the $4 trillion mark. Linear extrapolation suggests Alphabet could reach $4 trillion as early as the following Tuesday, and based on recent performance, it could happen even sooner, potentially today or tomorrow. This rapid ascent for a company of Alphabet's size is described as "extraordinary."

Stability and Investor Interest

During a recent slight market correction, Alphabet's stock moved sideways. This is interpreted as a sign of stability, indicating strong buying interest from both institutional and retail investors who are "buying those dips." This stability is contrasted with Nvidia's initial spike following the introduction of ChatGPT and the surge in GPU sales, where Nvidia was not as large a company as Alphabet is now.

December Market Seasonality

As the end of November approaches, the video delves into December market trends. Historically, December tends to be a "quiet" month, which investors could benefit from.

S&P 500 Year-to-Date Performance: The S&P 500 is up 14% year-to-date, and up 35% from a bottom seen several months ago. A recent "slump," which was about half of a typical 10% correction, barely registered as a blip on the year-to-date chart.

Historical December Trends:

• December is generally the third-best month for the S&P 500.
• Small caps tend to outperform in December, January, and February.

Anticipated December Rally: Given the significant market gains year-to-date, a period of consolidation is expected in the first half of December. The year-end rally, often referred to as the "Santa Claus rally," might occur in the latter half of the month.

Caveats and Historical Anomalies: The presenter cautions that "anything can happen." The example of December 2018 is cited, which was the worst December since 1931, with the S&P 500 experiencing a near bear market decline of almost 19%. While such an event is not anticipated this year, it serves as a reminder of potential market volatility.

Conclusion and Takeaways

Alphabet's recent performance is exceptionally strong, mirroring Nvidia's past growth and demonstrating remarkable stability even during market corrections. The company is on a clear path towards a $4 trillion market capitalization. Looking ahead, December is historically a positive month for markets, though a period of consolidation is likely before the anticipated year-end rally. Investors should remain aware of potential historical anomalies, but the current market sentiment suggests a continuation of upward momentum.