Wall Street swings continue as Nvidia upheaval rattles AI trade

Driving the tumult are inflation fears that keep upending bets on the Fed, tensions with Iran that continue to jolt oil prices, and shaky confidence in the artificial-intelligence trade. Bond markets have offered little refuge, with the two-year Treasury yield climbing nearly 28 basis points this month before Friday's retreat, following similarly large swings in opposite directions over the previous two months.

Investors are embracing two distinct playbooks: buying the whole market through index funds, or doubling down on speculative wagers that have delivered both spectacular gains and crushing losses. Vanguard's flagship S&P 500 fund attracted nearly $US24 billion in October, while a triple-leveraged semiconductor ETF pulled in $US9 billion despite losing half its value. A group of double-leveraged Nvidia ETFs have attracted roughly $US900 million over the past week, even as the chipmaker's shares lost 13 per cent following the departure of its longtime CEO.

For Chris Davis, chairman of Davis Advisors, the unsettling part is how readily investors seem to be shrugging it all off. “The uncertainty is enormous, the fragility, the things that can go wrong very suddenly, enormous – combined with a tremendous amount of complacency in the market,” he said.

Skyler Weinand, chief investment officer of Regan Capital in Dallas, says 10-year Treasury yields could stay above 5 per cent and the Federal Reserve will continue to increase interest rates. “We are staying in higher-quality, defensive names that aren’t taking on additional debt and are producing ample cash flows. We are in the same camp of running minimal leverage and staying defensive until we see better downstream gains from AI,” he said.

Retail investors have poured tens of billions into equity funds over the past two weeks and have been snapping up leveraged funds after sharp declines in assets at the start of November, raising the possibility that dip buying could stabilise the battered technology trade. Joseph Crow, a 35-year-old retail investor from Connecticut, said he wagered $US3000 on call options expiring in three days on the triple-levered Direxion Daily Semiconductor Bull 3X ETF, betting on a fast rebound. “It was definitely a lotto purchase,” he said. “Seeing Nvidia so beaten down, it was like, ‘Man, something’s gotta lift eventually.’” He says he sold for roughly $US23,000 the next day.

The familiar index funds continue to exert a powerful pull. Vanguard's VOO alone has absorbed about $US140 billion in 2026, on pace for a record annual inflow. Vanguard's VOO and VTI, iShares' IVV, State Street's SPY and SPYM, and Invesco's QQQ have captured about 30 per cent of all equity ETF flows this year, a share that has been rising sharply since 2023, according to Athanasios Psarofagis at Bloomberg Intelligence. “Every year, there’s a new single-stock story — Nvidia is the latest. Each time, it reminds investors the risk that comes with concentration,” he said.

The S&P 500 staged its first weekly advance since early October, gaining 2.5 per cent, while the Nasdaq 100 added 3.5 per cent. Just a small group of S&P 500 members was trading at 52-week highs.