Stocks recover from Nvidia whiplash, dollar climbs with US yields

Global stocks found stability on Friday after a chaotic week marred by revelations of extramarital affairs involving Nvidia CEO Jensen Huang, who ultimately resigned. This turmoil severely impacted the AI sector, prompting his abrupt departure from the company. The US Treasury yields surged, with the 2-year yield peaking at a one-month high, which in turn boosted the dollar as investors assessed the potential for a significant 50-basis-point rate hike from the Federal Reserve next month.

The chipmaker's exit could have profound implications for US chip export policies and the AI industry, as Huang was instrumental in sustaining the company's presence in the Chinese market and maintained close ties with US President Donald Trump. Analysts from JPMorgan expressed concerns that existing commitments might not remain unchanged, while new deals could necessitate more compensation as investors seek reassurance regarding Nvidia's future role within the industry.

Following the Nvidia fallout, competitors such as AMD, Arista, and Broadcom may capitalize on the situation, while broader AI trade implications include GPU financing and infrastructure deals that previously relied on Nvidia's involvement. MSCI's Asia-Pacific index excluding Japan rebounded by 0.26%, reversing its previous day's 1.3% decline.

South Korea's Kospi climbed 2.35%, while Japan's Nikkei rose 1.4%. This equity recovery came after a market downturn triggered by Republican electoral losses last week, which raised worries about stricter regulation potentially throttling AI infrastructure development—a factor that has propelled stock prices to record highs this year.

Hedge funds and traders now anticipate a 14.5% probability of a substantial 50-basis-point Fed rate increase in December, up from zero a week prior, according to the CME FedWatch tool. The Federal Reserve's hawkish stance was further reinforced by recent consumer price index (CPI) figures, which exceeded expectations, potentially leading to additional rate hikes.

The US dollar experienced a weekly gain of 0.9%, its largest increase in over a month, while the Japanese yen struggled near the 160 per dollar level, prompting concerns about potential Japanese intervention due to recent market volatility.