Wall Street Slips as Nvidia Hits a 52-Week Low on Huang's Exit, While AMD and Broadcom Jump Nearly 6% and Treasury Yields Approach 5%

Wall Street absorbed one of the most dramatic corporate leadership changes in years with surprising composure on Thursday, but beneath the calm headline numbers, investors were reshuffling their bets on the artificial intelligence trade.

The S&P 500 fell 0.36% to 7,592.40 on November 12, the Nasdaq Composite slipped 0.39% to 25,366.09 and the Dow Jones Industrial Average declined 0.36% to 52,297.09, according to The Motley Fool. Small-cap stocks fared worse, with the iShares Russell 2000 exchange-traded fund falling 1.64%, according to StockTitan.

The day was dominated by Nvidia, whose co-founder and chief executive Jensen Huang resigned before the market opened. Nvidia's shares fell as much as 14.35% to $148.80, their lowest level in 52 weeks, shortly after trading began, before recovering to close 4.34% lower at $166.19.

Rivals rally

Investors moved quickly to position for a possible shift in the competitive landscape. Advanced Micro Devices, Nvidia's main rival in graphics processors, rose 5.86%, and Broadcom, which designs custom AI chips for large technology companies, gained 5.54%, according to The Motley Fool.

The moves reflected speculation that customers might diversify their suppliers if Nvidia's leadership transition creates uncertainty. Large cloud providers and AI companies have already been developing their own chips and buying from multiple suppliers to reduce their dependence on Nvidia.

Other AI-linked stocks fell. Super Micro Computer, a maker of AI servers built around Nvidia chips, fell 11.3%, and AI cloud provider Nebius fell 16.84%, according to StockTitan.

Nvidia's heavy trading

Nvidia's trading volume of about 748 million shares was more than five times its average of 141 million, according to The Motley Fool, as investors reacted to the news. The company's market value at the close was about $4.01 trillion.

Nvidia's shares have fallen almost 11% since November 6 and are about 31% below their record close of $239.24 on October 6, according to StockTitan. The decline reflects the board's investigation into Huang's conduct, reports linking him to a woman suspected of ties to Chinese intelligence, and broader concerns about AI spending.

Yields edge towards 5%

Rising bond yields added to the pressure on stocks. The 10-year US Treasury yield climbed to about 4.98%, approaching the 5% level last seen during periods of intense market stress, according to The Motley Fool. Higher yields raise borrowing costs for companies and consumers and make bonds more attractive relative to stocks.

Investors are bracing for a possible interest rate increase by the Federal Reserve in December after hotter-than-expected inflation data earlier in the week. Traders had priced in a high probability of a rate hike, according to market reports earlier in the week.

Housing market strain

Economic data released on Thursday highlighted the impact of high interest rates. Existing-home sales fell 5.5% in October from September to an annual pace of 3.75 million, the lowest since August 2010, according to the National Association of Realtors, as reported by StockTitan. Sales were 8.8% lower than a year earlier.

The median existing-home price rose 0.4% from a year earlier to $416,700. The association's chief economist said mortgage rates are at their highest level since 2000, apart from one month in 2023.

Initial jobless claims rose by 9,000 to 200,000 in the week ended November 7, according to the Labor Department, a level that still indicates a relatively healthy labour market.

Gold and Bitcoin fall

Other assets also came under pressure. Gold fell 3.02% to $3,879.60 an ounce, according to The Motley Fool, as rising yields reduced the appeal of non-yielding assets. Bitcoin fell about 6.6% to around $68,600.

Sectors and other movers

Industrial stocks led gains, while healthcare lagged, according to The Motley Fool. Global Payments fell about 12%, and agricultural company Corteva dropped 24.3%, while power developer Fermi rose 13.8%, according to StockTitan.

Among large technology stocks, Alphabet rose about 1.6%, Tesla 1.7%, Amazon 0.5% and Microsoft 0.4%, while Apple slipped 0.1% and Meta fell 0.8%.

The concentration risk

Nvidia accounts for more than 6% of the S&P 500, according to Siebert Financial chief investment officer Mark Malek, meaning its moves have a large impact on index funds and retirement savings around the world. The fact that the index fell only modestly despite Nvidia's sharp intraday decline suggests that investors were rotating within the market rather than selling broadly.

That rotation, from Nvidia towards rivals and from technology towards industrials, has been a recurring theme in recent weeks as investors reassess the AI trade.

What it means for Indian investors

Indian investors with exposure to US markets through international mutual funds, exchange-traded funds or direct investment have felt the impact of Nvidia's decline, since the company is one of the largest holdings in many US technology funds. Rising US yields also matter for India, as they can draw foreign capital away from emerging markets and put pressure on the rupee.

So far, however, foreign investors have continued to buy Indian shares in November, as India benefits from a rotation away from crowded AI trades.

A rotation, not a rout

The muted decline in the major indexes contrasted with the drama surrounding Nvidia. Market strategists have noted for several weeks that investors are rotating from the most crowded AI trades into other parts of the market, including industrials, financials and companies seen as indirect beneficiaries of AI spending, such as power and equipment suppliers.

That rotation reflects both valuation concerns and a desire to diversify. After a long period in which a handful of technology giants drove most of the market's gains, investors are seeking exposure to a broader range of companies, particularly those with strong cash flows and less sensitivity to sentiment about AI.

The bond market's message

The rise in Treasury yields towards 5% is perhaps the more important signal for global investors. Higher yields reflect expectations that interest rates will stay elevated for longer, as well as concerns about large US government deficits. They raise the cost of capital for companies and governments around the world and put pressure on the valuations of growth stocks, whose value depends heavily on future earnings.

What comes next

Markets will focus on October producer price inflation data on Friday, Nvidia's third-quarter results on November 17 and Anthropic's IPO, which is expected to price on November 18. The Federal Reserve's December meeting looms over all of it. For now, the message from Thursday's trading is that investors still believe in AI, but are increasingly willing to spread their bets beyond Nvidia.