Fed December Rate Cut Expectations & AI Bubble Concerns: Impact on NVDA and Tech Sector

The December rate cut expectations, driven by San Francisco Fed President Mary Daly’s comments (non-voting but aligned with Powell), have had a mixed impact on the tech sector and NVDA [1]. The CME FedWatch tool shows an 81% probability of a December cut, up from ~50% days prior [2]. NVDA rebounded +1.70% on Nov 24 ($182.55) after a 7.81% drop on Nov20, likely due to lower discount rates for growth stocks from expected rate cuts [0]. However, the Tech sector’s modest +0.15% gain reflects mixed sentiment, amplified by AI bubble concerns [0]. Bloomberg reports circular deals (Nvidia investing in AI firms that buy its GPUs) and SoftBank’s $5.8B NVDA stake sale fueling bubble anxiety [3].

1. Rate Cut-AI Sector Link
   : Lower rate expectations boost growth stocks like NVDA but are tempered by bubble fears, leading to mixed Tech sector performance.
2. Circular Deal Risk
   : Nvidia’s self-reinforcing cycle of investing in AI firms using its chips could inflate valuations without corresponding revenue growth.
3. Fed Policy Influence
   : Daly’s non-voting status does not diminish her impact, as her alignment with Powell signals potential FOMC consensus for a December cut [1].

• AI bubble burst risk from overvaluation due to circular deals and unrealistic revenue projections [3].
• Long-term correction if AI firms fail to deliver on growth promises, amplified by rate cuts delaying the inevitable [3].
  
  Opportunities
  :
• NVDA’s rebound post sell-off presents a buying opportunity for investors with a high-risk tolerance [0].
• Rate cuts may accelerate AI investments for firms with solid fundamentals [0].

• Fed Daly supports December rate cut (81% probability via CME FedWatch) [1,2].
• NVDA closed +1.70% on Nov24 ($182.55) with 256.62M shares traded [0].
• Tech sector gained +0.15% while Energy led with +1.77% on Nov24 [0].
• SoftBank sold its entire NVDA stake ($5.8B) amid bubble concerns [3].