Is this it? Is the market finally past its tipping point and at the beginning of a more serious sell-off? Technically, no. While stocks as a whole haven't made any net progress since November and have shown some pronounced flashes of weakness of late, they've also not lost any ground during this stretch.
Simply treading water, however, is in and of itself a subtle red flag, suggesting hesitation that often precedes pullbacks. It would also be naïve to ignore the fact that several stalwart stocks have seriously struggled since releasing lackluster quarterly numbers. These high-profile stumbles -- many of which happened to major artificial intelligence (AI) players -- are another sign that the broad market may be primed for a pullback.
If that's in the cards, it will adversely impact most stocks. But it will likely hurt a handful of big names a whole lot more. Here are three of the names most vulnerable to such marketwide weakness.
Image source: Getty Images.
1. Nvidia
If any single name can be considered a candidate for leading the market lower, it's arguably the name that's led it higher since 2023. That's Nvidia (NVDA 1.32%), of course, which became the world's biggest publicly traded company thanks to its 1,100%-plus gain during this stretch.
As the chart above illustrates, NVDA is also one of the names that's failed to make any forward progress since August of last year, as investors are now more seriously scrutinizing whether its AI-driven growth is actually sustainable. Many people fear far too much money is being spent on artificial intelligence, with far too little to show for it.
NASDAQ: NVDA
Key Data Points
And it's not a wild concern. Although plenty of competition is finally surfacing, Nvidia-made processors remain the computing heart and soul of most new AI data centers. If the artificial intelligence industry starts running into headwinds, demand for its hardware could fade dramatically and quickly. It matters simply because data center processors now account for three-fourths of the company's top line.
2. ASML
It's not just Nvidia shares that might struggle if a broader market correction is sparked by an AI-specific meltdown. In fact, after its recent run-up, there's another name that might technically be even more vulnerable to a sweeping setback if investors suddenly panic. That's ASML Holding (ASML 2.23%).
Do you know how most modern-day high-performance microchips are made? If you're not familiar with the industry's underlying technologies, you might be surprised to learn that most of this silicon is actually layered into existence using complex light-based patterns projected onto a substrate. It's called lithography, or in ASML's case, extreme ultraviolet lithography. This company makes the equipment that allows chipmakers to "spray" raw materials into semiconductors. And armed with a huge patent portfolio, it dominates this business.
NASDAQ: ASML
Key Data Points
Being the leader of this particular sliver of the chipmaking market, though, can be a double-edged sword. While everybody wants -- and even needs -- your wares when times are good, priced at around $400 million apiece right now, even the slightest hint of economic weakness could cause would-be buyers of ASML's expensive EUV machines to balk. (The Dutch company sold 300 new EUV systems last year, for perspective, down from 2024's count of 380.)
It hasn't been a worry for investors just yet. In fact, ASML shares are up another 35% just since the end of last year thanks to rekindled assumptions that the need for computer chips will only continue growing regardless of the economy's condition. That's wishful short-term thinking though, pushing the stock up to nearly 50 times this year's projected profits of $29.65 per share, and leaving it that much more vulnerable to a pullback.
3. JPMorgan Chase
Last but not least, add JPMorgan Chase (JPM 1.86%) to your list of well-known names that could struggle if a bubble pops this year. It's obviously not directly impacted by an implosion of the artificial intelligence business or its key stocks. Indirectly though, presuming a popping of any AI bubble leads to broad market weakness that ultimately stifles the economy, it could crimp much of JPMorgan's business.
For instance, if strategic acquisitions dry up as would-be suitors embrace a "wait and see" mindset, it could be a drag on the bank's mergers and acquisitions and consulting/advisory business, which currently accounts for about 10% of the company's revenue. At the same time, if investors feel like there's just no good reason to purchase stocks, the bank's equity trading business could tank. That puts roughly one-fifth of its total business under pressure.
Perhaps JPMorgan Chase's biggest liability, however, is the reduction of net interest income that results from the lower interest rates often seen in periods of economic malaise. Not only do lower interest rates mean lower profit margins on the loans it makes, but economic weakness can also simply sap demand for new loans. It matters because net interest income is roughly half of JPMorgan's total revenue.
NYSE: JPM
Key Data Points
It wouldn't destroy the company or the stock, to be clear. A tough year for a bank would barely even be a bump in the road for most other kinds of companies. The problem is that this particular bank stock is still priced as if this risk doesn't exist at all. It does.
That being said, it's worth mentioning that investors may finally be starting to price in this risk. After peaking in January, JPM shares have made a couple of lower lows that have been followed by lower highs. This is a subtle sign that doubts about its near future are brewing. That's typically how bigger sell-offs start: subtly and slowly.
