Fed Rate Cut Expectations (Dec 2025) & AI Market Implications: Analysis of Daly's Comments and Reddit Discussions

The analysis focuses on Federal Reserve rate cut expectations for December 2025, driven by San Francisco Fed President Mary Daly’s surprise support for a cut due to sudden job market deterioration [1][4]. The CME FedWatch Tool indicates an

of a December cut [5], up from ~30% the prior week [7]. This dovish shift occurs amid FOMC divisions, with minutes revealing “strongly differing views” on the cut’s appropriateness [3].

AI leader NVIDIA (NVDA) has a stretched valuation: current price (~$180) is 3x its DCF-calculated intrinsic value ($62) [9]. Sector performance shows Energy (+1.76%) leading gains, while Technology posted a modest +0.149% increase [0].

1. Cross-Domain Impacts
   : Rate cut expectations link AI investment robustness (NVDA’s $5T market cap [12]) to job market fragility (Daly’s focus on deterioration [1]).
2. Valuation vs. Performance
   : NVDA’s stretched valuation contrasts with modest Tech sector gains, indicating investor caution despite AI hype.
3. Uncertainty from Divisions
   : FOMC splits add volatility risk, with markets currently leaning toward risk appetite but vulnerable to panic sell-offs if cuts are delayed.

• AI Bubble
  : NVDA’s valuation and SocGen’s bubble warning [8] signal potential overheating.
• Volatility
  : FOMC divisions could trigger market swings if the cut is not implemented.

• Energy Sector
  : Rate cut expectations drive Energy’s outperformance (+1.76% [0]).
• Buying Windows
  : Panic sell-offs (as discussed in Reddit) may present buying opportunities.

This report recaps Fed rate cut expectations (81% probability), Daly’s dovish stance, NVDA’s valuation, sector performance, and FOMC divisions. No investment recommendations are provided; the content is for informational purposes only.