US stocks have been roiled in recent days on investor concerns that the tech rally had run too hot. The S&P 500 has fallen more than 3% from an October peak, and executives at Goldman Sachs Group Inc and JPMorgan Chase & Co have said the market could be primed for more declines.
Some of those fears were assuaged late on Wednesday after Nvidia Corp delivered a surprisingly strong revenue forecast and pushed back on the idea of a bubble. Technology-heavy Nasdaq 100 futures gained 1.5% on Thursday.
Muddy Waters’ Block said he was looking at some smaller companies involved in AI for potential bearish bets.
See also: Traders pile into tech hedges as rout in software stocks deepens
“You have all these AI adjacent companies, AI pretenders, that’s where you would want to look to short,” he said. “However, so long as the leaders such as Nvidia are still going up into the right, that would be a very dangerous trade.”
He added that the boom in passive trading had “broken the markets in terms of greatly diminishing price discovery”.
“It doesn’t matter how expensive Nvidia gets,” Block said. “All of these funds that are buying the S&P 500 index, they will not sell Nvidia until they have net outflows. They will buy it everyday at whatever the price is if they have inflows.”
See also: Nvidia partner Foxconn’s sales soar in sign of strong AI demand
On Wednesday, Block unveiled a rare long position in Canadian miner Snowline Gold Corp at the Sohn London Investment Conference. Snowline’s shares rallied as much as 23%.
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