Nvidia and Russell 2000: Early warning signs?

Nvidia's last death cross in April 2022 resulted in a near-48% decline over the following six months. Given the stock’s meteoric 948% rise since October 2022, its recent sideways movement could signal the AI-fueled rally is running out of steam.

Meanwhile, the Russell 2000, often seen as a barometer for broader market conditions, has flashed the same warning sign for the first time in 17 months. The last time this happened in October 2023, the index fell another 5.6% before finding a bottom. Small caps often act as a leading indicator of broader economic weakness, making this development particularly concerning.

Microsoft joins the list

Now, another tech giant is flashing a death cross: Microsoft. The stock has already dropped from $468 to around $389, a sharp 17% decline. This drop coincides with broader fears, including trade tensions, high valuations, and market uncertainty.

Yet, Microsoft remains at the forefront of AI adoption, with a staggering 67% of cloud environments utilizing OpenAI or its Azure OpenAI SDKs. Despite its dominance, Wall Street remains unimpressed. January’s earnings report showed strong numbers, but Azure’s growth fell short of sky-high investor expectations. The market had priced in perfection-Microsoft delivered merely “excellent.”