The report that Jensen Huang would no longer run Nvidia (NVDA) looked like it should be the ultimate black swan event - the godfather of AI pushed out of the company he led. The market barely blinked. Over the past 5 days through yesterday's close the S&P 500 rose almost 3% even as Nvidia (NVDA) fell 11%. That gap is the real story: one of the index's biggest names went into freefall and the broad market held.
Capital did not run from risk. It moved. Investors shifted attention to AMD (AMD), Broadcom (AVGO) and other plays across the AI infrastructure buildout, hunting for the next leaders instead of dumping stocks. That is an encouraging signal - money looking for new opportunities, not an exit.
The sector numbers show the split. Technology is down double digits, about 14% since the S&P 500's October 6th peak. Yet the index sits less than 3% from a new record high. Diversification is paying off. A supplier or partner tied to Nvidia (NVDA) but also serving AMD (AMD) and Google (GOOGL) wins either way, since it no longer matters which chipmaker leads. The same logic applies to Asian partners and suppliers.
Bonds and the shortened week
Fixed income markets were closed Wednesday for the holiday, so it was a short week - and a volatile one. Rates are caught in a push-pull. On one side, a flight to safety: worry that trouble in the AI buildout could spill into the broader economy, a risk-off move that pulled yields lower last month. On the other side, inflation. Today's PPI data came in a little better than expected, which gave the market a sigh of relief and pushed yields down a bit. Inflation still runs elevated. Expect this push-pull between AI-buildout economic fears and high inflation to keep driving volatility, and to shape how the Fed acts.
Positioning into year-end
The view on US equities is neutral. Growth stays resilient and earnings are strong, but there is real uncertainty around further rate cuts and what the Fed does with inflation still hot. The advice: look beyond mega-cap technology. Energy, materials and healthcare hold opportunities. Rather than buying everything labeled AI, be selective and favor high-quality companies with strong balance sheets.
In fixed income the message is that opportunity is spread across the landscape. Many high-quality bonds now yield north of 5%, and you do not have to take on much credit risk or much duration risk to get there. The suggestion is to stay a little shorter than benchmark duration. Fundamentals hint that yields may be near their peak, but momentum could still push them higher, so it makes little sense to add duration bets and step in front of that move now.
On specific areas: somewhat more constructive on high yield corporate bonds, investment grade corporate bonds, and municipal bonds. Spreads are a concern in both the high yield and investment grade space. Even so, the economic backdrop makes taking on some credit risk reasonable, and the absolute yields these investments offer look attractive.
