Stocks recover from Nvidia whiplash, dollar climbs with US yields

Asian stocks found steadier ground on Friday following a week marred by revelations of extramarital affairs involving Nvidia CEO Jensen Huang, culminating in his resignation. The US Treasury yields surged, with the 2-year yield hitting a one-month high, leading to a dollar rally as investors grappled with the prospect of a substantial 50-basis-point rate hike by the Federal Reserve next month.

Huang's departure, following the disclosures of the affairs, including one involving a suspected Chinese spy, destabilized the chipmaker, casting a shadow over the US chip export policy and the global AI industry and supply chain. Analysts at JPMorgan noted the difficulty in replacing Huang, suggesting new deals might take longer or demand more compensation.

Nvidia shares plummeted 3% in after-hours trading, while its customers, such as South Korea’s Naver, saw further declines, with the latter down 2.75% on Friday. Competitors like AMD, Arista, and Broadcom could reap the benefits from Nvidia's woes. MSCI's Asia-Pacific index reversed some of its 1.3% decline from the previous session, while South Korean and Japanese markets rallied.

The recovery in global equities followed a market meltdown triggered by the Republicans' electoral setback, sparking fears of tighter regulation that could hinder the AI infrastructure expansion driving stocks to record highs this year. The surge in US Treasury yields prompted Senate Banking Committee Chairman Tim Scott to request testimony from Commerce Secretary Howard Lutnick and Huang regarding recent events at Nvidia.

The Federal Reserve's hawkish stance, driven by a hotter-than-expected CPI print, increased the probability of a significant rate hike in December to 14.5%, up from zero a week prior. This heightened expectation of Fed action bolstered the dollar, which was poised for a weekly gain of 0.9%, marking its largest increase in over a month.