This week, American markets oscillated between fears of an artificial intelligence bubble and the relief brought by Nvidia’s results. Before the numbers were released, the correction in technology and several names linked to AI reinforced the idea that the sector could have reached unsustainable levels. But Nvidia’s quarter surprised on the rise, helped recover part of the Nasdaq’s losses and returned a more constructive tone to the sector. Volatility, however, remains high: fundamentals appear solid, but investors are more nervous and any sign of a slowdown could trigger rapid selling.
In the context of monetary policy, the Fed minutes published on Wednesday acted as a brake on market sentiment. The central bank committee is divided and several members question the need for a new interest rate cut in December, with inflation still above target and less data available after the partial shutdown of statistical services. The implied probabilities of a cut in December fell and Treasury yields remained high, remembering that the US reference rate could remain frozen longer than the market would like.
The common thread in the markets continues to be the centrality of the USA. The initial drop in the main American indices at the start of the week triggered synchronized corrections in Europe and Asia, underlining that American capital markets continue to set the global tone. Cryptocurrencies extended last week’s slide and Bitcoin fell to multi-month lows after losing close to a third of its value since recent all-time highs. For many investors, Bitcoin has become the ultimate exponent of risk appetite, given its high correlation with the Nasdaq and other technological segments. The current correction in cryptocurrencies is taken as a sign that risk tolerance is shrinking and that liquidity is no longer as abundant as at the beginning of the year. The combination of strong results from Nvidia, a Fed more reluctant to cut interest rates and a shake in confidence in cryptocurrencies made investors more skeptical, but did not stop them from continuing to bet on the growth trend of artificial intelligence.