Barron’s ran an important article this weekend titled “There is no Magnficent 7. There’s Simply The Magnificent One” [SUBSCRIPTION REQUIRED]. That Magnificent One – obviously – is Nvidia (NVDA) which is responsible for 1/3 of the S&P’s YTD gain through May.

But NVDA’s rise has become out of all proportion to its fundamentals and the stock will deflate sooner rather than later. At NVDA’s closing price of $131.88 on Friday, its market cap on a fully diluted basis is just shy of $3.3 trillion. According to Yahoo! Finance, analysts have NVDA earning somewhere between $2.37 and $2.83 this year. That means its P/E on current year earnings is ~50x – and these could very well be peak earnings unless you believe spending on AI infrastructure will continue at the current frenetic pace for years to come. In other words, NVDA may be trading at 60x 2025 earnings, 70x 2026 earnings, etc… So it’s even more expensive than the 50x current earnings.

As I wrote on Tuesday and Thursday, the Magnificent 7 are the only game in town, driving the major indexes higher and masking weakness among the remaining stocks in the market below the surface. At a certain point, however, there is no greater fool to buy NVDA, Apple (AAPL) or Facebook (META) at an even higher price – at which point the stock market will roll over. It will happen any day now….

Further, David Stockman makes the case in his book The Great Money Bubble that this isn’t any ordinary bubble. According to Stockman, this is the bubble of all bubbles that has been inflating since Greenspan stepped in after Black Monday in 1987 and assured the market that the Fed stood ready to provide liquidity as needed thus inaugurating The Fed Put. Since that time, easy monetary policy from Greenspan through Bernanke, Yellin and now Powell has flowed into the financial markets and real estate causing their values to massively disconnect from their underlying income streams. If the Fed is prevented from stepping in to bail out financial markets this time due to persistent inflationary forces in the real economy, the market may be in for the kind of bear market nobody alive has ever seen before….

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