Reading the Stock Market Last Week: Nvidia vs. Apple Market Cap Reversal and Bank ROCE Comparison
In this article, as we kick off the earnings season for the third week of July 2025, we will explain the overall trends in the financial market, the earnings results of major companies, and include a personal announcement from renowned investor Steve Eisman along with answers to viewer questions (mailbag). We have organized professional financial indicators and sector-specific performance in an easy-to-understand manner, summarizing key points that individual investors can use for future investment decisions.
1. Personal Announcement
Before diving into investment topics, we would like to share a shocking and important message from Steve Eisman. At the beginning of the video, he confessed the following:
“I was diagnosed with breast cancer about a month ago. Because it was caught early, a full recovery is expected, but I plan to undergo chemotherapy over the next few months.”
The background to this announcement is to inform viewers about his change in appearance out of consideration, while also conveying an awareness message that “breast cancer is not just a woman's disease.” Reflecting on his own experience, where a doctor friend pointed out a lump in a squash locker room and saved his life, he is calling on men to perform regular self-checks as well.
2. Market Overview and the Start of Earnings Season
2-1. Major US Stock Indices Hit New Highs
Based on the closing prices for the week of July 18, the S&P 500 and NASDAQ both hit record highs, up over 7% and 8% year-to-date, respectively. While short-term concerns include the risk of additional tariffs (30%) between the US–Mexico and US–EU, as well as policy trends ahead of the election, the market remains firm, driven by technology stocks.
2-2. Trade Friction and Nvidia's Resumption of Chips to China
During the week, the Trump administration announced additional tariffs on Mexico and the EU. Meanwhile, it was reported that the US government would soon approve the re-export of Nvidia's H2O chips to China, suggesting a selective easing of high-end chip restrictions for China. Following this, Nvidia's stock reached a record market capitalization of $4.2 trillion, putting it about $1 trillion ahead of Apple.
3. Key Points of Bank Earnings
The first week of the earnings season was packed with earnings announcements from major banks. First, we will organize ROTCE (Return on Tangible Common Equity) and P/TBV (Price to Tangible Book Value), which are prioritized by bank investors.
3-1. Key Indicators: ROTCE and P/TBV
ROTCE: Net Income / Tangible Common Equity (Total Equity - Intangible Assets)
P/TBV: Stock Price / Tangible Book Value per Share
A high ROTCE indicates high profitability and is the primary cause of valuation differences when compared to peer banks.
3-2. JPMorgan Chase: Domestic Top 21% ROCE
In the Q2 earnings, they achieved an EPS of $4.96 (+6% year-on-year, revenue of $45.5 billion), and their ROTCE was 21%, the highest among major domestic banks. The investment banking and trading divisions showed strong performance that exceeded expectations, resulting in a solid “beat and raise” earnings report.
3-3. Wells Fargo's Stagnation and the Impact of Asset Cap Removal
This was a transition-period earnings report following the removal of the asset growth cap imposed by the Fed due to long-standing scandals. EPS was $1.54 (revenue of $21 billion, +0.7% year-on-year) with an ROTCE of 15.2%. Constraints on expanding loan balances slowed profit growth, and the interest income outlook for the next quarter was also revised downward.
3-4. The Fortunes of Citi, Goldman Sachs, and Morgan Stanley
Citigroup: EPS of $2.10 (revenue of $21.7 billion, +10%) with ROTCE still lagging at 8.7%.
Goldman Sachs: EPS of $10.91 (+27%) with ROTCE at 13.6%. Recovery in M&A and IPOs is key.
Morgan Stanley: EPS of $2.13 (+17%) with ROTCE at 18.2%, ranking second in the U.S. The strength of the wealth management division stood out.
3-5. Challenges for Regional Banks & Bank of America
Both PNC and M&T are seeing stable growth with ROTCE around 15%. Meanwhile, Bank of America, despite an EPS of $0.89 (+7%), saw its ROTCE remain at 13.4% due to margin compression from holding long-term bonds from the past.
3-6. Valuation Comparison
In terms of Price-to-Tangible Book Value (P/TBV) ratios, JPMorgan and Morgan Stanley are at about 3x, leading regional banks are at about 2.5x, and BofA is considered somewhat undervalued. Goldman has a high ratio despite an ROTCE in the 13% range due to M&A expectations. Only Citi remains in the category of less than 1x.
4. Sector Highlights Outside of Finance
There were a series of notable earnings reports in sectors other than banking as well.
4-1. Major Property & Casualty Insurers and Pharmaceuticals: Progressive & Johnson & Johnson
Progressive Insurance: Q2 EPS of $4.88 (+96% year-over-year) and net premiums earned up 18%, maintaining high profitability.
Johnson & Johnson: Revenue exceeded market expectations and the full-year outlook was raised. Performance remains solid despite concerns over drug price tightening.
4-2. GE's Restructuring and Segment Earnings
GE has been split into three companies since 2018.
GE Aerospace (Aircraft Engines): EPS of $1.66 (+38%) with revenue up 23%, guidance raised.
GE Healthcare (Medical Devices): EPS of $8.84 (downward revision from $10.12 in the same period last year) with a significant downward revision to full-year forecasts. The performance gap is clear.
4-3. From Consumer Staples to Advanced Technology
Archer Daniels Midland (ADM): Fell slightly following a decline in corn syrup ingredient prices.
Netflix: Q2 EPS of $7.19 (+47%) and full-year guidance raised, but the stock was sold off due to the view that "whisper numbers" had been higher, adjusting from a +40% year-to-date gain.
Union Pacific: Rumors of a ripple effect from railway M&A have emerged. If the acquisition proposal for Norfolk Southern is realized, ripple effects are expected across the entire transportation sector.
5. Mailbag: Q&A from Viewers
5-1. Why focus 100% on the US market?
His answer is that "the information technology sector accounts for about 31% of the S&P 500, and when including tech-related companies, it reaches about 50%. There is no other country with such a high tech ratio," so growth opportunities can be maximized.
5-2. Why a "long-only" strategy?
After his past experience of being significantly net-short and correctly predicting the financial crisis, he maintains a stance of expecting long-term gains, citing the strengthening of the banking system through tighter regulations and the fact that the US economy has regained unprecedented dynamism due to drivers of technological innovation such as AI.
Conclusion: Future Risk Factors and Outlook
At present, the fundamentals of the US economy are good, and the banking, consumer, and technology sectors are all solid. However, the only concern is the reignition of a trade war. If tariff hikes and the strengthening of technology export controls proceed, global supply chains could be disrupted again, creating headwinds for market sentiment. Investors are required to use earnings data as a medium- to long-term "scenario check" to verify their own investment hypotheses, rather than chasing short-term stock price reactions.
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