Fed Rate Cut Expectations & AI Market Dynamics: December Cut Prospects and NVDA Performance Analysis

Fed San Francisco President Mary Daly’s surprise support for a December rate cut marks a shift from her usual alignment with Chair Powell, driven by concerns over a vulnerable labor market and easing inflation ([1]). The CME FedWatch Tool shows an ~85% probability of a 25-basis-point cut in December ([2]), reflecting market confidence in this policy shift.

While rate cuts typically lower borrowing costs for AI investments, Nvidia (NVDA) has declined 1.75% to $177.10 as of Nov 28 ([0]), indicating AI-specific concerns override general optimism. Michael Burry holds put options on NVDA, criticizing extended chip depreciation schedules amid accelerating obsolescence ([3]). Bridgewater’s Greg Jensen echoes these concerns, warning NVDA’s chips may become obsolete as AI evolves ([3]).

Energy sectors lead with a 1.52% gain, while Technology lags at 0.20% ([0]), reflecting investor diversification away from AI-related risks. This rotation underscores growing caution toward tech stocks despite rate cut expectations.

NVDA’s price fell from $180.26 (Nov24) to $177.10 (Nov28) with volume below the 193.71M average ([0]). This decline occurs despite rate cut expectations, highlighting bubble concerns as the primary driver ([3], [4]).

1. Cross-Domain Correlation
   : Rate cut expectations (positive for broad markets) are being offset by AI bubble concerns (negative for NVDA), leading to mixed market reactions.
2. Bubble Concerns Override Optimism
   : NVDA’s decline despite rate cut prospects indicates investor focus on long-term AI sustainability over short-term policy benefits.
3. Sector Rotation Trend
   : Energy’s outperformance signals a shift toward safer assets amid tech sector uncertainty.

• AI Bubble Burst
  : Burry’s put options and Jensen’s obsolescence warnings suggest potential downside for AI stocks like NVDA ([3]).
• Chip Obsolescence
  : Rapid AI evolution could render NVDA’s current chips obsolete, impacting long-term revenue ([3]).

• Buying Dips
  : Panic sell-offs related to rate cut news may present entry points for long-term investors ([0]).
• Energy Sector Growth
  : Energy’s outperformance offers diversification opportunities amid tech volatility ([0]).

• Rate Cut Probability
  : ~85% for December (CME FedWatch, [2]).
• NVDA Performance
  : 1.75% decline to $177.10 (Nov28, [0]).
• Sector Trends
  : Energy (+1.52%) outperforms Tech (+0.20%) ([0]).
• AI Bubble Concerns
  : Burry/Jensen warnings highlight risks to NVDA ([3]).