Nvidia and other tech giants have driven recent market rebounds, but concerns about earnings quality and concentration persist. Since Friday’s chip stock selloff, the Nasdaq 100 has staged two rebounds, yet it remains down 4.25% for the month. Bank of America warns that rising earnings forecasts may not translate to sustainable returns. Analysts like Savita Subramanian note that markets are pricing in unrealistic expectations, risking disappointment when profits fail to materialize. The $36 billion in abnormal income reported by Alphabet, Amazon, and Nvidia—mostly from unrealized gains—highlights fragility in the Magnificent Seven’s performance.

The market’s reliance on a handful of companies underscores a dangerous imbalance. Societe Generale’s Andrew Lapthorne shows that just 20 mega-caps dominate the MSCI All-Country index, with their profits dwarfing the rest. This concentration mirrors the dot-com era, where outsized gains by a few companies preceded crashes. Equal-weighted indices, which reflect average stocks, are now lagging as high valuations skew results. Subramanian admits the S&P 500’s cap-weighted version offers only 6% upside, suggesting investors should avoid broad exposure.

Indonesia’s central bank added a second interest rate hike to stabilize the rupiah, revealing deeper fears about Prabowo Subianto’s economic policies. The move drained reserves for a fifth consecutive month, underscoring investor anxiety. While the Jakarta Composite Index rebounded 7%, the core issue remains: policy uncertainty derails emerging markets. Analysts caution that without structural reforms, Indonesia’s underperformance will worsen. The US market’s recent bounces mirror this pattern—investors seek quick fixes but face systemic risks. The May inflation data, due Wednesday, could trigger another selloff if it signals prolonged high rates.