Nvidia's stock market dominance fuels big swings in the S&P 500

NEW YORK - Nvidia's huge stock rally is still exerting an outsized influence over the S&P 500 index , reinforcing concerns that broader markets could be hurt if the chipmaking giant's fortunes turn.

Nvidia jumped after CEO Jensen Huang flagged strong demand for the company's chips, boosting its market value by more than $200 billion and accounting for 44% of the S&P 500's surge that day, data from Nomura showed. This year, the index has failed to rise more than 1% on any day when Nvidia's shares ended lower. In 2020, there were 13 such instances.

While recent strength in non-tech sectors has stirred hopes of a broadening rally, a sustained sell-off in any of the tech megacaps could still badly hurt broader markets, analysts said. Nvidia's gains are amplified when traders rush into upside call options. When buying of these options surges, market makers who sell these contracts are on the hook to buy and deliver more Nvidia shares at the agreed price, leaving them "short gamma," in options parlance."You do see the market keen to buy upside calls when it's working," said Chris Weston, head of research at online broker Pepperstone. "When it's hot, these flows absolutely make a difference.

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