Key insights
- Rising rate hike probabilities due to persistent inflation and geopolitical tensions (Iran) pose a threat to growth stocks, particularly Nvidia, which reports earnings Wednesday. Its high PE ratio of 48 is predicated on low rates and continued AI spending, both of which are now uncertain. This creates significant downside risk for NVDA and potentially other high-growth tech stocks.
The fed was supposed to be cutting rates this year literally every forecast from january had 2-3 cuts priced in. Now we're sitting at 45% odds of a hike because of Iran driving oil to $107 and inflation not budging. Nvidia reports wednesday expecting $79 billion in revenue, stock is up 640% in 3 years. PE sitting at 48, that valuation only makes sense if rates stay low and AI spending doesn't slow down.Both of those assumptions are now in question at the same time. curious what people think actually happens after wednesday.