Roundtrip
Nvidia’s US$900B move in under 36 hours set the tone for markets leading into this week. And it wasn’t the only directional shift that traders had to price in.
Does the AI trade still have legs? It’s a question most analysts struggle to answer.
After another set of blockbuster earnings, Nvidia ($NVDA) shares surged higher last Wednesday – keeping the AI dream alive. With US$57B in Q3 revenue and CEO Jensen Huang describing demand for its Blackwell GPUs as ‘off the charts,’ it was hard to predict what came next.
But by 2pm ET Thursday, the price action had fully reversed. $NVDA had effectively gained and lost US$450B in under 36 hours. The US$900B roundtrip had big implications: as Nvidia swings, the market follows.
The pullback didn’t last long. Big tech led indices higher on Monday, with Alphabet ($GOOGL) as the Mag7’s outperformer. The firm is reportedly in talks to sell its Tensor AI chips to Meta ($META). Google’s chip partner Broadcom ($AVGO) also rallied on the news – jumping 11% as the S&P 500’s biggest gainer on Monday.
Google’s TPUs are their answer to Nvidia’s GPUs. And the emergence of an alternative had some investors selling $NVDA this week. Nvidia took that personally, posting on X that while it was ‘delighted by Google’s success’ Nvidia’s chips remain ‘a generation ahead of the industry.’
There’s a bigger story around swinging market sentiment: The Federal Reserve. Less glamorous than the battle of AI accelerators, but still the most longstanding dictator for risk appetite, liquidity and investor confidence.
Odds of a Fed rate cut in December jumped from under 27% to 85% in less than a week. That spike came after influential Fed officials John Williams and Mary Daly said this week they would support a rate cut. Their comments followed a delayed jobs report from the BLS showing US unemployment edging up to a near four-year high of 4.4%.
Many investors see a year-end rally as contingent on rates coming down, meaning the December rate decision will be closely watched – particularly after the inflation report for October was cancelled in light of the government shutdown.
So does the AI trade still have legs? Maybe. But last week showed it takes more than earnings to shake it.
The next part of this ride will involve a delicate dance between economic signals and escalating chip wars — and neither is known for moving in a straight line.
