The stock market swell is more of a Magnificent Seven surge (which, in turn, is more of an Nvidia explosion)

Economic growth, while still robust, is slowing. At the same time, inflation continues to outpace the Federal Reserve‘s 2% target, hurting consumer sentiment in the process. The unemployment rate continues to hover around half-century lows, though the persistently tight labor market further fueling inflation means that these job vacancies aren’t exactly something to brag about. But the most unambiguously strong feature of the economy is the stock market, and it is booming.

The biggest market headline of the year is the ascension of Nvidia, which became the third company in history to reach a $3 trillion valuation, surpassing Apple to become the second-biggest company behind Microsoft. Fueled by the West’s preference for “friendshoring” chip manufacturing away from Chinese influence, as well as the artificial intelligence boom, Nvidia’s stock is up 217% in the past year, a clear success story for an otherwise lackluster economy.

Equities do not incorporate the entire economy, and no president deserves complete credit or blame for market performance. But compared to all the other lackluster, if not abysmal, metrics President Joe Biden has to brag about, his most powerful appeal to inflation-wary voters is the strength of the stock market. In absolute terms, the New York Stock Exchange Composite is up some 27% since Biden took office, outpacing both the nearly 20% inflation wrought in that time and the 5% decrease in real average weekly wages. Although the wealthy own a disproportionate share of assets traded in the stock market, nearly two-thirds of all Americans polled by Gallup report owning some equities, which include direct stock holdings, as well as individual retirement accounts and 401(k)s.

But, of course, not all markets are created equal. The stock market swell isn’t much greater than that when you account for inflation. And more than a “stock market” boom, it’s a Magnificent Seven surge, which, in turn, is fueled by AI and the Nvidia explosion.

In inflation-adjusted terms, the S&P 500 is up 17% since Biden took office, an admirable amount but one that pales in comparison to the 54% increase in the index under former President Donald Trump’s four years in the White House. The inflation-adjusted Nasdaq 100 is up 22% under Biden — good, but a far cry from the 140% increase under Trump. And digging deeper into that growth, it’s clear that just as inflation exacerbates the chasm between the working class and the wealthy, “Bidenomics” has primarily benefited the biggest companies.

In the last year alone, the Magnificent Seven — Nvidia, as well as Alphabet, Amazon, Apple, Meta, Microsoft, and Tesla — grew by 76%, contributing the majority of the 26% of the S&P 500 overall. From October 2022 until the start of this year, the Magnificent Seven was up more than 60% compared to the rest of the 493 companies in the index, whose stock prices didn’t increase a full 30%. In the past year, whereas the earnings estimates have fallen among the 493, Mag7 earnings are up nearly 30%.

But even within the prestige of the Mag7, Nvidia seems to be doing all the heavy lifting. In the first five months of the year, Nvidia’s stock price increased by more than 100%. By contrast, Meta increased 32%, Alphabet 23%, Amazon 16%, and Microsoft 10%. Apple and Tesla stock fell from the start of 2024, with the S&P 500 up a mere 11% overall.

Recall that the Mag7 comprises fewer than 30% of the S&P 500 and just 41% of the Nasdaq. When we boast that the stock market is soaring, we mean the Mag7, and when we boast of the Mag7’s performance, we mean Nvidia.

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Again, given the diplomatic reality that we cannot remain dependent on the South China Sea for semiconductors and the raw potential of generative AI, it’s not a bad bet to assume that Nvidia will continue to explode. As a matter of sheer scope, Nvidia’s market cap is now larger than the entire annual economic output of Russia and Canada, and it’s tantamount to the entire trading value of the London Stock Exchange. A rising tide lifts all boats in finance, and the continued growth of Nvidia translates to pensions, retirement funds, and real wealth dramatically outpacing the scourge of inflation.

The stock market as a whole is much less robust than the Magnificent Seven makes it seem, but for that, we have Nvidia to thank in particular.