Fed Daly's December Rate Cut Support: Market Expectations & AI Sector Implications

On November 24, 2025, San Francisco Fed President Mary Daly unexpectedly backed a December rate cut, citing vulnerable labor markets and nonlinear job loss risks [0]. This comment—rarely deviating from Fed Chair Powell’s stance—spiked market expectations for a December cut to ~85% per the CME FedWatch Tool [1]. Major indices reacted positively: NASDAQ Composite gained 1.73% (led by growth stocks), S&P500 +1.03%, Dow +0.17% [2]. Sector performance varied: Energy (+1.13%) led, Healthcare (-0.03%) lagged, and Tech (including AI-related stocks) rose 0.53% [3]. For NVIDIA (NVDA), Jim Cramer highlighted potential China sales resumption as a key catalyst, while the company’s Blackwell Ultra GPU faces a supply crunch with racks sold out into 2025 [4,5].

1. AI Investment Alignment
   : Reddit discussions linking rate cuts to AI investment boosts are validated by NVDA’s supply crunch—indicating strong demand for AI infrastructure [4,5]. Lower rates reduce capital costs for AI projects, accelerating adoption.
2. Fed Policy Split
   : While Daly supports a cut, Boston Fed’s Collins warns of inflation risks [0,1], creating market uncertainty.
3. Growth vs Value
   : NASDAQ’s outperformance reflects investor preference for growth stocks (tech/AI) under rate cut expectations [2].

• Risks
  : Inflation reignition concerns (Collins [1]), NVDA’s China sales dependency on U.S. approval [4], and potential market correction if the Fed does not cut rates (given high expectations [1]).
• Opportunities
  : AI sector upside from lower rates (benefiting NVDA [5]), and energy sector gains from expected economic stimulus [3].

The event centers on Fed Daly’s dovish comment, driving rate cut expectations to ~85%. Market reactions favor growth stocks, with AI/tech showing resilience. NVDA’s supply crunch and China sales potential highlight AI sector strength. Fed policy splits and inflation risks remain key considerations for market participants.