Morning Wrap - Will the markets recover from the scandal involving Nvidia's ousted CEO❓

The scandal at Nvidia came to an end on Thursday with the departure of Jensen Huang, who, after 33 years, stepped down as CEO and resigned from the board of directors. The final straw was a Wednesday evening article in *The New York Times* revealing a second affair, this time with Kimberly Powell, the vice president of healthcare. Chief Financial Officer Colette Kress was named interim CEO, and Harvey C. Jones, a board member since 1993, assumed the newly created position of board chairman—the first such role in the company’s history. The board now consists of 10 members, none of whom are part of senior management, and is searching for a permanent successor both inside and outside the company.

The national security angle is deepening. According to findings by the intelligence firm Tesari, shared with CNBC, Alice Huang held stakes in companies linked to a data center in Shenzhen, whose key client was Huawei Cloud—Nvidia’s largest Chinese competitor. According to The Information, Megaspeed—with which she was associated—helped facilitate the delivery of Nvidia chips to Chinese companies worth at least $7.5 billion. The Chinese Foreign Ministry calls the espionage allegations “slander.”

Washington is responding with a tougher stance toward China. House Speaker Mike Johnson speaks of an “emerging consensus” on restricting chip exports, and Republicans want to add new restrictions to the National Defense Authorization Act (NDAA). At least four bills are gaining momentum in Congress. Among them is the Match Act, which would force allies to restrict the sale and servicing of chip-making equipment to China, and the Remote Access Security Act, aimed at curbing the leasing of Nvidia’s computing power overseas. According to Reuters, the White House is even considering removing Commerce Secretary Howard Lutnick, and Senator Tim Scott has called for public hearings with Huang (December 3) and Lutnick (December 10).

The scandal is straining U.S.-China relations just ahead of Trump’s meeting with Xi Jinping at the APEC summit in Shenzhen (November 18–19). Arthur Kroeber of Gavekal believes the scandal has “destroyed the credibility of the largest corporate lobbyist against export controls,” and that Congress may tighten regulations before the end of the year. Beijing could respond by cutting off supplies of rare earth metals or materials used in chip production, which is why the trade truce will likely hold, but will become “increasingly precarious.” According to Reuters, Chinese AI companies are already trying to lease computing power based on Nvidia chips outside of China before that door closes.

Tensions in the Middle East have flared up again. Trump wrote on Truth Social on Thursday that the U.S. “does not need a deal with Iran.” Combined with the escalation of attacks on Saudi energy infrastructure, this sent Brent crude up more than 3%, to $95.82. Overnight, the Revolutionary Guard announced that it had destroyed a U.S. early-warning radar station in Bahrain in retaliation for an attack on a telecommunications tower in Sirik, and warned companies cooperating with the U.S. on oil shipments through the Strait of Hormuz; however, these reports have not been confirmed, and the U.S. has not commented on them.

On the macro front, the most important factor is the growing expectation of Fed rate hikes. Following October’s higher-than-expected CPI inflation, New York Fed President John Williams stated that inflation is “stubbornly high” and that the Fed “still has work to do.” The market is pricing in a high probability of a 25-basis-point hike on December 9, and the probability of a 50-basis-point hike has risen to 14.5% according to CME FedWatch, up from zero a week ago. Capital Group notes that over the next 12 months, the market is already pricing in three rate hikes.

The bond market is clearly feeling the impact, although the TNOTE contract rebounded slightly this morning (+0.06%, 105.33). The yield on 2-year U.S. Treasuries hit 4.89%, the highest in a month, while the yield on 10-year Treasuries reached 5.14%, the highest in three weeks. Japanese 10-year bonds followed suit, with their yield rising by about 7 basis points to approximately 2.87%. Today at 2:30 p.m., we’ll see the October U.S. PPI inflation figures, with the consensus forecast at +0.4% m/m and 6.6% y/y.

Japan is once again defending the yen. Finance Minister Satsuki Katayama warned against “unilateral, sharp movements” in the foreign exchange market and announced cooperation with the U.S. Treasury Department, but did not comment directly on intervention. The New York Fed confirmed that on July 31, the U.S. purchased 79.4 billion JPY (approx. $497 million) worth of yen, marking the first U.S. intervention in the yen market since 1998. Tokyo will also expedite winter subsidies for household energy bills.

From other regions: UBS does not expect the RBA to cut rates before the end of 2027, as the AI boom is fueling inflation, even though Australia’s economic growth is set to slow to 1.4%. The yield spread between Australian and U.S. 10-year bonds, which existed at the beginning of the year, has disappeared. New Zealand’s manufacturing PMI fell to 54.9 points, but the sector has now been expanding for 16 consecutive months. Goldman Sachs forecasts that annual AI-related spending will reach $1.4 trillion by the end of 2027, or nearly 4% of U.S. GDP.

Nvidia dominated Thursday's trading session on Wall Street. The S&P 500 and Nasdaq Composite each lost about 0.4%, while the Dow Jones fell about 190 points (−0.4%), partly due to rising oil prices. Nvidia’s stock fell 4.3% and hit a 52-week low during the session. For most of the day, the company’s market capitalization was below $4 trillion, but at the close it returned to just above that level. Despite this, it was the best week for the indices since early August: the Nasdaq gained 3.2%, the S&P 500 2.9%, and the Dow about 2%.

Nvidia fell 11% this week and is heading for its sixth consecutive week of declines, its longest such streak since 2012. Since the beginning of October, the company has lost about 29% of its value—or about $1.6 trillion—and has fallen behind Apple in the ranking of the world’s most valuable companies. After the market closed, the stock lost another 3% or so. Analysts are divided: D.A. Davidson lowered its price target from $300 to $200 while maintaining a “buy” rating; Oppenheimer expects fundamentals to take a back seat; and Seaport Research issued a “sell” recommendation.

Capital isn't fleeing the semiconductor sector; it's simply shifting to Nvidia's competitors. This week, AMD gained 30%, and Broadcom rose 24%. TSMC, which makes money regardless of whose chips it manufactures, rose 11%. The rotation also extended to more defensive analog companies: Texas Instruments gained 13%, Analog Devices 12%, and Germany’s Infineon 14%. Dylan Patel of SemiAnalysis warns that without Huang, who personally secured production capacity from suppliers, Nvidia’s advantage in the supply chain could erode in favor of Google and Amazon.

The AI sector’s results alone are strong. Cisco beat expectations and raised its forecast for fiscal year 2027, and AI revenue from hyperscalers is expected to more than double that year. Applied Materials issued a forecast above the consensus, and Cerebras raised its targets for 2026; with an order backlog of approximately $26 billion, it expects to triple its revenue in 2027. JPMorgan warns, however, that Huang’s departure could complicate the financing of GPU purchases and new infrastructure contracts in which Nvidia acts as a supplier, investor, or guarantor.

This morning, futures are giving up their gains from last night. After the close, Nasdaq-100 futures were up about 0.6%, but now the US100 is down 0.32% (28,310 points) and the US500 is down 0.16% (7,609 points). Concerns about a hawkish Fed and 10-year yields above 5% are weighing on the market, so today’s PPI inflation data will set the tone for the session.

Asian markets opened higher, but most of the gains faded. The KOSPI gained about 2.8% at the open but reversed course and was down about 0.7%, falling to around 5,300 points. SK Hynix fell more than 2%, Samsung about 0.6%, and Naver, a customer of Nvidia, about 2.75%. The KOSDAQ maintained a gain of about 1.5%. Samsung gained about 2% at the open following Bloomberg reports of talks regarding the acquisition of Modine, a manufacturer of cooling systems for data centers, whose shares jumped 29% after the U.S. market closed.

In Japan, the Nikkei 225 was up about 0.8% in the afternoon, to about 61,300 points, although it had risen by about 1.4% midway through the session. The Topix was up about 0.3%, while the JP225 futures contract was flat in the morning (−0.02%, 61,222 points). The Hang Seng fell by about 1% to around 23,770 points, the CHN.cash futures contract lost 0.81% (7,933 points), and the Shanghai Composite gained about 0.2%. Australia’s ASX 200 was down about 0.6–0.7%, and shares of mining company Capstone Copper fell more than 5% amid low copper prices.

China’s SMIC reported record revenue in the third quarter (approximately $3.19 billion) and more than double its profit. The company’s co-CEO expects revenue to exceed $12 billion for all of 2026, but warns that shortages of chip-making equipment could disrupt investments. If Congress passes the Match Act, the problem could quickly escalate. According to reports, ByteDance plans a $6 billion share buyback at a valuation of approximately $400 billion, 20% higher than a year ago.

The dollar is on track for its biggest weekly gain in over a month (about 0.9%), driven by a hawkish Fed. The USDIDX stands at 103.12 (+0.04%), EUR/USD is at 1.1057 (+0.03%), and GBP/USD is down 0.06% to 1.3226. USD/JPY has broken through 160 and stands at 160.09 (+0.17%), which puts it in a zone where the risk of intervention—this time perhaps jointly with the U.S.—is very high. The PBOC set the yuan’s reference rate at 6.7152, well above expectations (6.6756), while USD/CNH stands at 6.6714.

The zloty is stable: The USD/PLN exchange rate is 3.9828 (+0.05%), and the EUR/PLN exchange rate is 4.4040 (+0.07%). .

Oil prices are stabilizing this morning following Thursday’s surge. Brent (OIL) is up 0.34% to $96.07, while WTI is down 0.11% to $88.57. Barclays believes the market is underestimating the risk, as oil flows from the Middle East remain about 15% below pre-war levels, and inventories outside of China are low. Similarly, Goldman Sachs sees upside risk to its forecast. Airlines are feeling the impact more and more as fuel price hedges entered into before the war expire, and jet fuel costs around $148–150 per barrel.

Gold is up 0.55% this morning, to $3,897.61 per ounce, but is down significantly for the week (it was trading at around $4,120 on Monday) amid pressure from rising yields and a strong dollar. Silver is down 0.23%, to $49.90. BlackRock notes that gold is nearly 30% below its record high, but support in the form of central bank purchases remains, although the pace of growth is expected to be more moderate. Société Générale estimates that the January rebalancing of commodity indices will result in approximately $3.3 billion in gold contract purchases.

Natural gas prices in the U.S. fell 1.7% to $3.298, while European natural gas (NATGAS.EU) rose 1.06% to 95.52, as attacks on infrastructure in the Persian Gulf are keeping the risk premium in Europe elevated. Copper in London fell to a four-month low on Thursday amid concerns about weaker demand from AI.

Next week will be crucial for Nvidia. On Tuesday, November 17, the company will report its earnings: according to LSEG, analysts expect revenue of $108.9 billion, up 91% from a year earlier. A meeting with employees is scheduled for November 18, and before Thanksgiving (November 26), Huang is set to testify before the House of Representatives. Dan Ives expects Kress to lead the company for about a year, with a permanent successor coming from outside the company, while Jim Cramer believes he is “exactly the person needed right now.”

A major IPO is returning to the primary market. Anthropic is set to price its public offering on November 18, with trading on the Nasdaq set to begin the following day. The company is aiming for a valuation of approximately $1 trillion, and the offering is reportedly six times oversubscribed.

Bitcoin is down 3.68% to $68,659 and has fallen below $70,000 for the first time since August. It has thus broken through its 200-session moving average of around $73,000. The declines are being driven by outflows from U.S. Bitcoin spot ETFs, which have already reached nearly $2 billion in November.

What to expect from today’s session: Europe is expected to open flat. The EU50 is up 0.06% (6,386 points), the DE40 is down 0.01% (26,776 points), and the UK100 is down 0.05% (10,869 points). In Europe, semiconductor companies are worth watching: Infineon stands to benefit from a rotation away from Nvidia and ASML, though it is exposed to potential Match Act regulations. Airlines are also drawing attention as they grapple with high fuel prices.

The most important event is the U.S. PPI inflation report at 2:30 p.m. Following the strong CPI reading, another high reading would bolster bets on a 50-basis-point Fed rate hike in December. Add to that USD/JPY above 160 and the risk of intervention by Tokyo. The key question is whether the indices can sustain their recent upward momentum despite the crisis at Nvidia. In the background, the calendar for next week is already taking shape: Nvidia’s earnings on November 17, the Trump–Xi meeting at APEC on November 18–19, and Anthropic’s IPO on November 19.