Elon’s cage fight with Zuckerberg just happened. He lost

John D. Kiambuthi
3 min readFeb 5, 2024

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Big tech stocks have been on a remarkable ascent, seemingly defying market forces. However, recent trends suggest that a shift might be underway, with some established market dynamics potentially undergoing a transformation.

Despite expectations of harm from rising bond yields, particularly for companies heavily reliant on future earnings (like big tech), Friday’s strong jobs report sparked a jump in yields without hindering tech stocks. In fact, they performed well! This contradicts the prevailing notion that higher yields negatively impact “long-duration” companies by increasing the discount rate used to value their future earnings.

As evidence, consider the contrasting performances in 2022 and 2023. Both years saw significant yield movements, with 2022 experiencing rising yields and tech stocks struggling, while 2023 brought declining yields and tech stock recovery. However, so far in 2024, despite rising yields, tech stocks have continued to climb.

This intriguing development is further illustrated by the insightful chart from Michael Hartnett of BofA Securities. Analyzing this chart and the recent market behavior can shed light on the evolving relationship between bond yields and tech stocks.

While historical data suggests a weak correlation between 10-year yield changes and the Nasdaq’s performance, the current scenario of rising yields coinciding with strong gains in the index presents a rare exception. The only comparable instance occurred in 1999, preceding the dot-com bubble burst of 2000.

However, it’s crucial to consider other possible interpretations beyond a potential bubble. Historically, similar combinations have manifested in two distinct contexts:

1. Post-Recession Recovery: Following deep economic downturns (e.g., 2009), rising yields can reflect economic improvement, while investors simultaneously seek riskier assets like stocks, leading to stock market gains alongside yield increases.

2. Speculative Exuberance: In periods of excessive optimism and risk appetite, investors may disregard traditional valuation metrics, leading to market bubbles like the instance observed in 1999.

Therefore, attributing the current scenario solely to the potential for a bubble warrants caution. Analyzing other economic and market indicators alongside historical context is essential for a more nuanced understanding of this unusual conjunction of rising yields and a flourishing Nasdaq.

Michael Hartnett’s chart, encompassing data up to January 29th (last Monday), might already appear unusual with the Nasdaq’s performance. However, Friday’s further surge in the index adds another layer to the story.

This recent rise is largely attributed to the “Magnificent Seven” tech giants (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla). Notably, these companies spearheaded the market rebound in the first half of 2023. After a period of stabilization in the last six months, their recently released quarterly results (excluding Nvidia) have collectively driven them to a new record high relative to the broader market, as per Bloomberg indexes.

The “Magnificent Seven” tech giants (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) hold significant weight in the global market, as Michael Hartnett highlights. Their combined market value surpasses the combined GDP of major cities like New York, Tokyo, and London, demonstrating their immense economic influence.

Further emphasizing their impact, Meta’s single-day market cap gain on Friday following its earnings report nearly reached $200 billion, equivalent to the entire market value of Cisco Systems. This unprecedented growth marks the largest one-day market value increase ever recorded by a single company.

While the “Magnificent Seven” tech giants remain influential, their individual trajectories are diverging as they compete, particularly in the field of artificial intelligence (AI). Investors are increasingly scrutinizing which companies will gain the most advantage from AI advancements.

This competition was symbolically highlighted last year when Elon Musk, CEO of Tesla, challenged Meta’s Mark Zuckerberg to a “cage match.” While the physical fight never materialized, the financial battle has become increasingly one-sided. Meta’s market value has surged, surpassing Tesla’s by more than double, indicating a significant shift in investor sentiment.

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John D. Kiambuthi
John D. Kiambuthi

Written by John D. Kiambuthi

Corporate Finance & Securities Analyst stuck between a bull and a bear. Finding balance between risk & reward in a chaotic market. Humorous approach to finance.

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