Now that large-cap stocks have propelled the S&P 500 and Nasdaq Composite to record highs, some stocks in this group have risen so fast that it may actually be time for them to pull back. Artificial intelligence (AI) chipmakers Nvidia and Broadcom have soared 174% and 61%, respectively, this year. Drug developer Eli Lilly, maker of type 2 diabetes treatment Maunjaro and obesity treatment Zepbound, is up 53% this year. In contrast, the S&P 500 was up 15% this year as of Tuesday’s close. As a result, there are growing concerns on Wall Street that the large-cap bull market may have gone too far, creating an unbalanced, unhealthy and lopsided stock market. For example, data from Bespoke Investment Group shows that Broadcom, Eli Lilly, Nvidia, Microsoft and Apple are all “extremely overbought,” as reflected by stock prices more than two standard deviations above their 50-day moving averages. Broadcom has soared 36% in June alone and tops the overbought list at about 34% above its 50-day moving average. The semiconductor maker’s market capitalization topped $846 billion as of Tuesday’s close, making it the eighth-largest in the S&P 500, just ahead of Eli Lilly. Last Thursday, Broadcom surged 12% after it reported second-quarter earnings that beat analysts’ expectations and announced a 10-for-1 stock split. Eli Lilly is also benefiting from increased demand for its weight-loss and diabetes drugs and is heavily overbought, Bespoke said. Lilly is trading about 12.5% above its 50-day moving average, and Tuesday’s close gave it a market capitalization of more than $842 billion, the ninth-largest in the S&P 500. Late last month, Lilly said it would invest an additional $5.3 billion in its Indiana manufacturing plant to boost supplies of its Maunjaro and Zeppelin. Other stocks considered severely overbought include Nvidia, Apple and Microsoft, which are trading 33%, 17% and 7% above their 50-day moving averages, respectively. All three make up the S&P’s three largest companies by market capitalization. Nvidia surged about 3.5% during Tuesday’s trading session, overtaking Microsoft as the most valuable publicly traded company. The company surpassed Apple in market capitalization earlier this month.
Nvidia and other megacaps could fall in the near term
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