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Walmart and Costco's valuations have surpassed Nvidia, sparking concerns of a potential market correction. Their high P/E ratios are driven by investor perception of safety, but history shows that labeling assets as "fail-safe" often precedes market turmoil. Despite strong fundamentals, their growth prospects do not fully justify their valuations, which are statistically "extremely expensive." A slight economic slowdown could prompt investors to reevaluate these inflated valuations, leading to significant stock price declines.

Walmart and Costco's recent valuations have surpassed that of Nvidia, raising concerns about a potential market correction. The high P/E ratios of these retailers are driven by investor perceptions of safety, but history shows that labeling assets as "fail-safe" often precedes market turmoil. Despite their strong fundamentals, the growth prospects of Walmart and Costco do not fully justify their current valuations, which are statistically "extremely expensive." A slight economic slowdown could prompt investors to reevaluate these inflated valuations, leading to significant stock price declines.

Nvidia's earnings report, scheduled for Wednesday, will be closely watched to gauge AI spending growth. The company's dominance in the AI sector and its history of exceeding earnings forecasts make it a key indicator for investors. However, some analysts have expressed caution about the potential AI bubble and unsustainable capital expenditures. The upcoming earnings report will be crucial, with options markets pricing in 7–10% post-earnings volatility [1].

Meanwhile, the U.S. Federal Reserve (Fed) is expected to adopt a dovish tilt and potentially cut interest rates in September. President Trump has been vocal about his desire for a significant reduction in interest rates, with some aides pushing for a 0.5 percentage point cut. However, Fed Chair Jerome Powell has indicated that he needs more data before making a decision [2].

The potential rate cut in September, if implemented, could increase market risk. The market expects a quarter of a percentage point cut, but some economists, such as Beth Hammack of the Federal Reserve Bank of Cleveland, have expressed concerns about inflationary pressure from tariffs and the need for a cautious approach [2].

In the cryptocurrency market, Bitcoin's status as a safe-haven asset may be tested as the U.S. stock market declines. Strategy, a company that holds a significant portion of Bitcoin's total supply, has been acquiring more Bitcoin despite falling prices and a decline in its own stock price. This move suggests that the company is maintaining its commitment to Bitcoin despite market conditions [3].

The earnings report from NVIDIA and the potential Fed rate cut in September will provide key insights into the current market conditions and future economic prospects. Investors will need to closely monitor these developments to make informed decisions.

References:
[1] https://www.ainvest.com/news/nvidia-earnings-impact-crypto-market-risk-stock-decline-fed-dovishness-concerns-2508/
[2] https://www.mk.co.kr/en/world/11401655
[3] https://cryptofrontnews.com/strategy-increases-bitcoin-holdings-to-over-3-of-total-supply/