Nvidia’s trillion-dollar swing is sending shockwaves through AI and crypto markets

Although financial markets appeared to be headed for a recovery earlier this morning, expectations were met with a sharp downward move that resulted in trillions of dollars being erased from crypto and stocks.

After a record-breaking revenue report from Nvidia yesterday, investors initially piled into tech, leading to stocks like NVDA kicking off with a 5% gain on Thursday.

Even Bitcoin saw some momentum during the CME gap hours. From 4:00 PM yesterday to 9:30 AM today (ET time), the market-leading digital asset gained 2.3% in value, trading as high as $93,000 in the late overnight hours.

However, the momentum disappeared soon after, causing almost all technology stocks and digital assets to lose a significant amount of value. Just a few hours later, Bitcoin hit a low of $87,840 on the Coinbase exchange, which is the lowest the currency has traded in the second half of the year.

Nvidia – the heart of AI stocks – started the day trading up almost 6% and ended with a deficit of 3%. Meanwhile, the S&P 500 had its worst performing day since Trump’s “Liberation Day” in April.

And while no one knows for sure what fueled the current bearish move, recent updates on US unemployment may have been partly to blame.

Unemployment data fuels shorts

The BLS is officially back after the shutdown. Today, the agency began releasing late data reports from September, which provided insight into how employment was faring at the time. Unemployment came in warmer than expected at 4.4%, increasing concerns about economic instability in the coming months and justifying the Fed’s decision to cut rates in October.

The real highlight of the macro day, however, was the October unemployment rate report may never come true. Given the current magnitude of rising unemployment in September, the idea that we may not get to see how the labor market performed in October creates significant uncertainty for the Fed.

Moreover, the 43-day shutdown will almost certainly have had an impact on the labor market. Furloughs and contract breaks are likely to have affected employment figures in the short term, which could lead to an unpleasant surprise for the November and December data.

The Congressional Budget Office estimated the shutdown reduced GDP growth by about 1.5 percentage points in the fourth quarter, which equates to ~$15 billion per week in lost output.

Growing concerns about the ‘AI bubble’

While Nvidia’s CEO Jensen Huang yesterday claimed that from his point of view there is no AI bubble revenue callingInvestors are increasingly concerned about a potential mismatch between valuations and fundamentals.

As detailed in The Kobeissi Letter on Twitter, the decline of the speculative market can also be partly attributed to a shift in sentiment, as growing concerns about polarization in AI investing fuel a binary environment. When the market is trending, FOMO takes over, while when it is falling, the fear of being ‘last out of the market’ accelerates the sell-off.

The sheer size of the AI ​​market makes virtually all speculative markets more or less dependent on it. Only Nvidia has a market capitalization large enough to cover more than twice the entire Bitcoin market, and Ethereum almost thirteen times.

There are no clear indications that a ‘bubble’ is bursting at this time. Nvidia’s P/E ratio remains as stable as historically, with third-quarter earnings representing a healthy 56% of quarterly revenue.

While the current market move was likely highlighted by the delayed unemployment data and the uncertainty it created for the Federal Reserve, it also implies that investors should expect more volatility, at least in the short term.