Stocks recover from Nvidia whiplash, dollar climbs with US yields

SINGAPORE: Stocks in Asia were on steadier footing on Friday after a turbulent week dominated by ​revelations of extramarital affairs involving Nvidia CEO Jensen Huang that culminated in his resignation, in a blow to the global AI boom he helped advance.

US Treasury ‌yields climbed, with the 2-year yield hitting a one-month high, lifting the dollar as investors weighed the prospect of an outsized 50-basis-point rate hike by the Federal Reserve next month.

Huang stepped down on Thursday after reports of the affairs, including one involving a suspected Chinese spy, which plunged the chipmaker into crisis and sent shockwaves through the AI industry.

His exit could have far-reaching consequences for US chip export policy and the broader AI ​industry and supply chain, given Huang’s push to preserve access to the Chinese market as well as his close ties with US President Donald Trump.

“His departure leaves a ​vacuum that will be difficult to fill… We do not assume existing commitments change, but new deals could take longer or require ⁠more compensation as investors look for reassurance about Nvidia’s role,” analysts at JPMorgan said in a note.

“The bigger implications are for the rest of the AI trade, particularly GPU financing and ​infrastructure deals in which Nvidia would presumably be involved as a supplier, investor or provider of contractual support.”

Nvidia shares fell 3% in extended trading, while those of its customers, including South ​Korea’s Naver, extended declines on Friday, with Naver down 2.75%.

Jon Zauderer, Citi’s head of specialist sales and a TMT specialist, said competitors such as AMD, Arista and Broadcom could benefit from the Nvidia fallout.

“If you think about the uncertainty that’s created about a potential management change, investors are going to look for alternatives,” he said.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.26%, reversing some of its 1.3% fall ​from the previous session. South Korea’s Kospi rose 2.35% while Japan’s Nikkei added 1.4%.

The recovery in global equities also follows last week’s market meltdown sparked by the Republicans’ electoral ​drubbing, which stoked fears that tighter regulation could slow the AI infrastructure buildout that has helped send stocks to record highs this year.

Nasdaq futures and S&P 500 futures rose more than 0.2% each, while ‌EUROSTOXX 50 ⁠futures fell 0.37%.

US Senate Banking Committee Chairman Tim Scott sent letters on Thursday to Commerce Secretary Howard Lutnick and Huang, asking them to testify over recent developments at Nvidia.

Concerns over the AI outlook also spilled into metals, with London copper prices hitting a four-month low in the previous session on fears of weaker demand, while shares of Australian-listed miner Capstone Copper Corp fell more than 5% on Friday.

What will the fed do?

The 2-year US Treasury yield peaked at 4.8920% in the early Asian session, while the benchmark 10-year yield rose to a three-week high ​of 5.1433%.

Investors now see a 14.5% chance ​of a jumbo 50-basis-point Fed hike in December, ⁠up from zero a week ago, according to the CME FedWatch tool.

“Right now, the US Fed has three hikes priced in for effectively the next 12 months… The (most recent) CPI print obviously was a bit hotter than expected. If those kinds of prints continue to happen, ​we can definitely see the Fed hiking three more times. It’s very within the realms of possibility,” said Manusha Samaraweera, fixed ​income investment director at ⁠Capital Group.

The increasingly hawkish Fed expectations in turn boosted the dollar , which was on track for a weekly gain of 0.9%, its biggest in more than a month.

The strength in the greenback, meanwhile, weighed on the yen, which languished close to the key 160 per dollar level on Friday , leaving traders on alert for any intervention from Tokyo.

The Federal Reserve Bank of New York said ⁠on Thursday it bought ​79.4 billion yen ($497.37 million) in the spot market on July 31, selling euros from the Exchange Stabilization ​Fund as part of a joint US-Japan intervention this summer to shore up the yen.

Elsewhere, Brent crude futures and US crude fell more than 0.3% each to $95.45 and $88.39 a barrel, respectively, having jumped in the previous session after attacks ​on Saudi energy infrastructure escalated and shipping disruptions through the Strait of Hormuz threatened global oil flows.

Spot gold was up 0.3% at $3,888.01 an ounce.