US Stocks Slip as AI Trade Reprices After Nvidia Shakeup

Market Moves Friday

Stocks slid as the AI trade lost altitude and fresh wholesale inflation data cooled expectations for a big December rate move. At 10:54 a.m. in New York, the Nasdaq 100 was down 2%, and the S&P 500 slipped 0.8%.

Selling spread across the AI supply chain. Nvidia's vendors extended losses, and rivals Broadcom and Advanced Micro Devices also dropped after rallying the prior day. Demand for AI exposure is still showing up elsewhere, with orders for Anthropic PBC's IPO reportedly six times oversubscribed.

Nvidia Turmoil and the AI Trade

Confidence in Nvidia took a hit after Jensen Huang was removed as CEO, with the chipmaker close to slipping under a 4 trillion dollar market cap after more than 500 billion dollars of value vanished this week. Investor nerves were further tested by disclosures of Huang's extramarital affairs, including one involving a suspected Chinese spy.

Doug Clinton, who serves as managing partner and co-founder at Deepwater Asset Management, told Bloomberg Surveillance the slide looks like a buying chance. He said Nvidia still has a multi year product pipeline in place and added, "I do think the trade can keep working," noting that similar pullbacks have taken "50 days or so" to recover.

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Broadening the Buildout

As AI infrastructure spending becomes less tied to a few mega caps like Nvidia, other players may get a lift. CoreWeave said it aims to secure at least 4 billion dollars through an investment grade loan raise. And Raeann Mitrione of Callan Family Office, a strategist and founding partner, expects the other 493 companies in the S&P 500 to post faster earnings growth than the Magnificent 7 this quarter and next. "We do continue to be optimistic around having more of that broad-based exposure going forward," she said on Bloomberg Radio.

Inflation, Rates and Oil - Why It Matters

Fresh producer price data took some air out of bets on a half percentage point Fed hike in December. The Producer Price Index rose 0.3% in October from the prior month and 6.5% from a year earlier - the quickest pace in four years but a touch below forecasts - easing some of the rate shock from hotter consumer prices earlier this week. "There's no urgency to go to 50," said Priya Misra, who is managing director and portfolio manager with JP Morgan Investment Management, warning that a half point move could create a "huge messaging problem" that pushes markets to assume a much higher neutral rate.

Energy stayed firm, with West Texas Intermediate around 89 dollars. The International Energy Agency said supply will top demand this quarter - a milestone not seen since the war started. The bottom line: AI centric stocks are getting repriced, rate odds are shifting with softer wholesale inflation, and capital formation in AI infrastructure is pushing beyond the usual leaders. Keep an eye on where earnings growth broadens - that is where your portfolio's diversification could start to pay.

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