To The Moon

This week sits at a key macro inflection point for US equities: the US is set to release important macro data including GDP and PCE, while the Jackson Hole Global Central Bank Symposium will be held over the weekend, where Fed Chair Kevin Warsh’s remarks could provide new guidance for rate expectations. Against this backdrop, Nvidia, a core name in the AI supply chain, will report earnings after the close on Wednesday; its results and guidance will directly test whether elevated capital expenditure can continue to translate into orders and profitability. The confluence of macro data, central bank commentary, and tech leadership earnings makes this week a critical checkpoint for whether the “AI narrative” can continue to support rich valuations. The core issue this week is not the direction of the index, but a shift in pricing power within a high-valuation market.

$英伟达(NVDA)$ $SK海力士(SKHY)$$SPDR能源指数ETF(XLE)$ $高科技指数ETF-SPDR(XLK)$

The equity–bond yield spread remains at a relatively low level, implying limited valuation compensation for equities relative to bonds; the S&P 500’s aggregate rolling P/E stays elevated, yet there is more pronounced differentiation in flows and returns across sectors. At the same time, SPY continues to see support, the M7’s aggregate market cap and their influence on the S&P 500 remain significant, but semiconductors and some tech themes have already turned cautious ahead of earnings. The market has not moved into broad risk-off; rather, it is proactively seeking new sources of return within a high-valuation environment.

$标普500(.SPX)$ $标普500ETF(SPY)$ $SP500指数主连 2609(ESmain)$ $微型SP500指数主连 2609(MESmain)$ $纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$ $纳指三倍做多ETF(TQQQ)$ $微型NQ100指数2609(MNQ2609)$ $NQ100指数主连 2609(NQmain)$ $道琼斯(.DJI)$ $道琼斯指数主连 2609(YMmain)$ $微型道琼斯指数主连 2609(MYMmain)$

The two biggest variables this week lie along two lines: first, Nvidia’s earnings will test whether AI capex can continue to convert into orders, revenue, and profits; second, US GDP, PCE, and the Jackson Hole meeting will determine whether long-end rates continue to exert valuation pressure. For the current US equity market, the real question is not whether the AI theme has ended, but how much the market is willing to pay for future earnings, and whether heavy investment can generate cash-flow returns quickly enough.

Market: Index Performance and Sector Divergence

According to Worldperatio data, the S&P 500 was relatively weak overall this week, but returns across sectors were inconsistent: healthcare, energy, and materials were relatively active, while information technology and semiconductor-related directions came under pressure. This suggests the market is closer to a state of “limited index volatility, accelerated internal rotation.” Looking at intra-week trading performance, healthcare was supported by clinical progress at pharmaceutical companies, while energy and materials were underpinned by oil prices, geopolitical risks, and fluctuations in commodity prices; the direct cause of the tech sector’s pullback was that the market proactively reduced risk exposure ahead of Nvidia’s earnings, while simultaneously re-pricing the rate sensitivity of high-valuation assets.

Therefore, this week should not be simplistically interpreted as a decline in risk appetite. A more accurate characterization is that capital is reducing concentrated exposure to a single tech theme and rotating some positions toward sectors with higher earnings visibility, relatively lower valuation pressure, or commodity-driven catalysts. The calm in the index masks internal rotation: if the largest-weight tech stocks weaken, the S&P 500 can still underperform even if most mid- and small-weight sectors advance. This is why it is essential this week to distinguish between “index performance” and “market breadth.”

Valuation: Cyclical Differences Amid Elevated Levels

Figure 1: S&P 500 Sector P/E (TTM) and Multi-Horizon P/E Valuation Assessment by Sector (5/10/20-year + relative to SMA200) | Source: worldperatio.com

According to worldperatio data, the market’s primary issue remains elevated absolute valuations, rather than short-term moves up or down. Information technology remains one of the most expensive sectors in the market; its valuation may still be within a reasonable range over the past five years, but on 10-year and 20-year horizons it is already significantly expensive. This indicates that the AI rally has not only lifted share prices, but also raised investors’ perception of what constitutes a “normal valuation” for the tech sector.

This phenomenon warrants particular caution. If one anchors only on the past five years, the tech sector may not appear extreme; but the past five years themselves were a high-valuation period shaped by ultra-low rates, post-pandemic liquidity, cloud computing, and generative AI. Using an already elevated valuation midpoint as a benchmark can easily underestimate the risk of long-term mean reversion.

Valuations in sectors such as real estate and industrials are also not cheap, suggesting that the current capital rotation is not strictly a value mean-reversion trade, but more a switch from crowded tech assets to other assets with strong fundamental narratives.

US Equity Index ETFs Continue Net Inflows, Semiconductor ETFs Remain in Net Outflows—Flow Divergence Is Pronounced

Figure 2: SPY Daily Net Flows | Source: etfdb.com

According to etfdb data, SPY’s monthly fund flows overall remain in net inflow territory, with inflows and outflows alternating and volatility increasing relative to earlier periods. This structure suggests that broad-based allocation accounts have not materially exited, but short-term capital is entering and exiting more cautiously; investors may be maintaining exposure at the index level while adjusting risk exposure through sector ETFs.

The monthly base for broad-based funds has not yet broken down. US equity ETFs have recently continued to see relatively clear net inflows, indicating that passive allocation, pension, and index-linked capital are still providing a floor for the market; however, the flow behavior of tech and semiconductor ETFs has begun to lag broad-based products, reflecting that active capital is reducing concentrated bets on the AI trade.。$美国10年期国债收益率(US10Y.BOND)$ $20+年以上美国国债ETF-iShares(TLT)$

The recent single-week net inflow of roughly $25 billion into US equity ETFs, alongside significant outflows from semiconductor ETFs over the same period, is a textbook manifestation of this “broad-based staying put, thematic cooling” dynamic.

Figure 3: Latest Period Net Flows by Sector ETF (Red = Inflow, Green = Outflow) | Source: etfdb.com

Capital attention flowing into healthcare, energy, and materials does not automatically mean the market has completed a rotation from growth to value; if the receiving sectors are themselves already in relatively high valuation ranges, this looks more like capital switching from one high-valuation theme to another high-momentum theme. The signal that truly warrants caution is if, over the coming weeks, broad-based fund flows shift from fluctuating net inflows to persistent, one-sided net outflows. Once the support from passive buying weakens, the risk of amplified volatility in the current high-valuation market could rise significantly.

M7 Weight Concentration and Earnings Verification

The M7 remains the core of this week’s market. According to MacroMicro data, the M7’s aggregate market cap and their weight in the S&P 500 remain elevated, implying that these companies are both the main engines of index gains and the largest sources of risk during index pullbacks.

Figure 4: M7 Aggregate Market Cap and Share of S&P 500 (Past Year) | Source: MacroMicro

Figure 5: M7 P/E (TTM) Comparison (Tesla axis log-compressed) | Source: Tiger Brokers

From a P/E perspective, internal valuation dispersion within the M7 is pronounced. Microsoft and Meta have relatively lower TTM P/Es, Alphabet and Amazon sit in the middle, Apple and Nvidia carry higher valuation premiums, and Tesla trades at an extremely elevated level given its long-term expectations around autonomous driving, robotics, and AI. Even with Tesla’s axis log-compressed in the chart, it remains clearly above the other companies, indicating that the M7 is not a homogeneous group in terms of valuation and earnings characteristics, but rather spans mature platforms, AI infrastructure, and long-dated narratives.

The M7 can no longer be viewed as a single asset class: Microsoft and Meta more closely resemble mature platforms with high free cash flow and stable earnings; Alphabet and Amazon are in a phase where advertising, cloud, and AI reinvestment are proceeding in parallel; Apple’s valuation relies more on hardware ecosystem and AI productization progress; Nvidia is the primary beneficiary of AI infrastructure demand; and Tesla retains a larger share of its valuation from long-term narratives around autonomous driving, robotics, and future technology.

The most important M7 event this week is Nvidia’s earnings. The market is focused not only on whether revenue will beat expectations, but also on Blackwell orders, Rubin product progress, gross margins, and the sustainability of data center customer capex. The options market implies roughly 5.4% post-earnings price volatility, corresponding to a potential market cap swing of about $280 billion, underscoring the market’s sensitivity to this event. If results and guidance continue to support AI demand, valuations for related assets may find support; if the market begins to worry about capex payback, financing dependence, or margin changes, volatility in high-valuation tech could widen.

$标普500ETF(SPY)$ $标普500(.SPX)$ $英伟达(NVDA)$ $SK海力士(SKHY)$ $Meta Platforms, Inc.(META)$ $谷歌(GOOG)$ $微软(MSFT)$ $苹果(AAPL)$ $特斯拉(TSLA)$ $亚马逊(AMZN)$

Figure 6: M7 Weekly Returns vs. S&P 500 | Source: Tiger Brokers

Among the other M7 companies, the common question for Microsoft, Alphabet, Amazon, and Meta remains: can capex growth outpace depreciation and financing pressures, and ultimately translate into cloud revenue, advertising efficiency, or enterprise AI service revenue? Apple’s Mac product upgrades reinforce its on-device AI positioning, but in the near term this looks more like an ecosystem signal and is not yet sufficient to change the company’s overall valuation logic. Tesla’s large-scale recall once again reminds the market that its valuation is not driven solely by auto sales; quality, regulation, margins, and the pace of autonomous driving delivery can all amplify share price volatility.

Summary

This week, US equities exhibit the characteristics of high valuations, broad-based support, and divergence across sectors and leaders. Capital has not shown signs of a broad-based exit, but caution in tech and semiconductors, together with substantial internal valuation dispersion within the M7, indicates that the market is raising its bar for earnings quality and capex payback.

From an investment perspective, it may be more productive to focus on structure rather than a single index direction: first, observe whether AI leaders’ revenue growth can cover elevated capex and generate sustainable cash flows; second, compare the valuation levels of sectors receiving inflows, avoiding the mistake of interpreting all rotations as value mean reversion; third, monitor the impact of PCE, GDP, and Jackson Hole commentary on long-end rates. If inflation moderates and the economy remains resilient, earnings growth may continue to digest some valuation pressure; if rates move higher alongside growing doubts about AI investment returns, market volatility could increase markedly.

Note: This report compiles and analyzes publicly available data and does not constitute investment advice. Valuation levels, fund flow, and yield data cited herein are drawn from the publicly labeled sources indicated. Markets involve risk; investment decisions should be made prudently.