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Friday’s session broke a nine-week winning streak in the NASDAQ 100, with the index plunging hard enough to make investors wonder whether the AI-led rally in names like NVIDIA (NASDAQ:NVDA | NVDA Price Prediction) and Microsoft (NASDAQ:MSFT) had finally rolled over. Today, the bid is back. The NASDAQ 100 is up 2% to 29,589.50 and the Invesco QQQ Trust (NASDAQ:QQQ) is up 2% to $719.50 in afternoon trading.
That rebound has revived a provocative question: could this be the start of a “summer melt-up”? David Cervantes, founder and principal of Pinebrook Capital, laid out the case on the Forward Guidance podcast (per @ForwardGuidance on X), arguing that the rally in mega-cap tech could extend further.
His thesis sits behind the action in NVIDIA (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN). Each posted blowout most-recent quarters that lend numerical weight to the case.
The “Too Much Fuel” Thesis
Cervantes frames AI as “THE macro driver” with “Everything is liquidity now.” The X thread from @ForwardGuidance summarizes it: “The economy has too much fuel to break.” A trillion-dollar AI capex cycle running through hyperscalers like Amazon and Alphabet, combined with rising debt issuance and persistent government deficits, keeps liquidity flowing.
The supporting macro is striking. M2 money supply reached $22.8 trillion in April, sitting in the 91st percentile of its range, while the Fed has cut 75 basis points over 12 months. With unemployment at 4.3% and consumer resilience supported by hidden buffers like boomer wealth transfers, the recession call gets harder, which is good news for Microsoft and the AI cohort.
The Earnings Backbone
NVIDIA’s Q1 FY2027 print delivered revenue of $81.61 billion, up 85% year over year, with Data Center revenue of $75.25 billion, up 92%. CEO Jensen Huang described “the largest infrastructure expansion in human history,” and the SEC 8-K filing disclosed total supply-related commitments of $119 billion. NVDA stock is up 47% over the past year.
Microsoft’s AI business surpassed a $37 billion annual revenue run rate, up 123% year-over-year, with commercial remaining performance obligations (RPO) at $627 billion. Alphabet’s Google Cloud grew 63% with backlog nearly doubling to over $460 billion, and Amazon’s AWS posted 28% growth, the fastest in 15 quarters. Meanwhile, Meta Platforms raised its full-year capex guide to $125 billion to $145 billion.
Retail conviction varies by name. Alphabet stock saw very bullish Reddit sentiment scores of 88 last week tied to a viral “buy and hold for 10 years” thread, while NVDA sentiment collapsed to 25 on Saturday before recovering to 66 today on SK Hynix partnership news.
Taking Note of the Headwinds
The melt-up case has cracks. Cervantes warns that the Fed’s bias has flipped from cuts toward hikes as inflation broadens and labor strength complicates a dovish pivot, a setup that could pressure long-duration names like NVIDIA and Meta Platforms. The VIX jumped 40% week over week to 21.51, in the 86th percentile of the past year.
Cervantes also flags AI hardware obsolescence as the next real risk for NVIDIA and its customers, asking whether cash flows arrive fast enough to fund the next wave before today’s GPUs become functionally obsolete. Reddit chatter about GPU rental prices falling, with the H200 down 38%, hints at the pricing pressure that bears focus on.
What Prudent Investors Can Watch
The NASDAQ 100 remains up 17% year to date, so the longer-term uptrend in mega-cap tech survived Friday’s break. Today’s 2% rebound indicates that buyers showed up, though one session doesn’t confirm a melt-up in NVIDIA, Microsoft, or their peers.
The signals Cervantes prioritizes are profit margins across the AI complex and whether the Fed’s next move will be an interest-rate hike. If Microsoft, Alphabet, and NVIDIA keep expanding margins while deficits stay elevated, the liquidity scenario could play out into the summer.
However, if the Federal Reserve pivots hawkish or hardware obsolescence accelerates, the AI trade could face its first real stress test. Investors may want to keep their position sizing modest in Meta Platforms and Amazon alongside the rest of the cohort, watch second-quarter earnings closely, and treat the melt-up framing as a scenario worth tracking rather than a forecast to chase.
