On Monday, the chip sector presented a rather contradictory picture. Nvidia fell more than 5% in premarket trading, while AMD surged 8.9% after Oppenheimer upgraded it to Outperform, and U.S. chip stocks as a whole continued to extend their gains. Within the same sector, one stock was being marked down while another was attracting buyers. Money is still in AI—it has just switched vehicles.
It all started with that apology letter from Jensen Huang. The board has formed an independent committee and hired outside counsel to investigate. The official position is that there is currently no evidence of confidential information being leaked; he will continue as CEO, and chip deliveries are not expected to be affected for now. What the market really can't let go of is the connection between the parties involved and Megaspeed, a buyer of computing power. The company has long faced allegations of bypassing chip controls. A private-conduct controversy may gradually fade with time, but once export controls enter the picture, the valuations of the entire computing-power supply chain are at stake.
So $NVDAB is currently carrying a governance discount, with its duration hinging on the closed-door congressional questioning on November 18. If the investigation quickly narrows to an individual matter, the discount could rapidly reverse, and positions chasing AMD would have to turn around. If it uncovers supply-chain violations, AMD will also find it hard to escape unscathed, and rotation within the sector could turn into a broader retreat.
The nearer-term variable is October's CPI, due tomorrow night at 21:30. If inflation comes in above expectations, the odds of a December rate hike will be repriced, putting pressure on high-valuation growth stocks across the board and pushing the governance story of individual stocks into the background. For highly leveraged positions in crypto markets riding the AI narrative, this is also the key factor to watch over the next couple of days.
How tomorrow night's data comes in will determine whether capital continues to rotate within the sector or steps back across the board. The above is solely my personal observation and does not constitute investment advice.
It all started with that apology letter from Jensen Huang. The board has formed an independent committee and hired outside counsel to investigate. The official position is that there is currently no evidence of confidential information being leaked; he will continue as CEO, and chip deliveries are not expected to be affected for now. What the market really can't let go of is the connection between the parties involved and Megaspeed, a buyer of computing power. The company has long faced allegations of bypassing chip controls. A private-conduct controversy may gradually fade with time, but once export controls enter the picture, the valuations of the entire computing-power supply chain are at stake.
So $NVDAB is currently carrying a governance discount, with its duration hinging on the closed-door congressional questioning on November 18. If the investigation quickly narrows to an individual matter, the discount could rapidly reverse, and positions chasing AMD would have to turn around. If it uncovers supply-chain violations, AMD will also find it hard to escape unscathed, and rotation within the sector could turn into a broader retreat.
The nearer-term variable is October's CPI, due tomorrow night at 21:30. If inflation comes in above expectations, the odds of a December rate hike will be repriced, putting pressure on high-valuation growth stocks across the board and pushing the governance story of individual stocks into the background. For highly leveraged positions in crypto markets riding the AI narrative, this is also the key factor to watch over the next couple of days.
How tomorrow night's data comes in will determine whether capital continues to rotate within the sector or steps back across the board. The above is solely my personal observation and does not constitute investment advice.