Fed jitters hit Nvidia after strong quarter

Nvidia’s stock saw a rapid shift in momentum at the end of the week, moving from a strong post-earnings rally to a sizable decline. On Friday, the shares closed at $217.55, down 4.6% for the day, after having touched an intraday high of $229.26. The reversal followed a nearly 9% gain on Thursday, which came in the wake of the company’s latest quarterly report.

Thursday’s advance reflected investor enthusiasm for what was described as an “amazing” quarter, alongside an unexpectedly strong revenue growth forecast outlined by Nvidia CFO Colette Kress in extended trading on Wednesday night. By Friday’s close, however, more than half of that prior day’s gain had been erased, underscoring how quickly sentiment can shift around high-profile growth stocks.

The timing of Nvidia’s pullback aligned with closely watched comments from Federal Reserve Chair Kevin Warsh at the central bank’s annual Jackson Hole symposium. In his first address at the event, Warsh signaled that interest rates may need to move higher to curb inflationary pressures if current trends do not improve. These remarks were interpreted as a more hawkish stance on monetary policy.

In interest-rate futures markets, the probability of a rate increase at the Fed’s September meeting rose significantly following Warsh’s comments, as reflected by the CME Group’s (CME) FedWatch tool. This shift in expectations contributed to broader pressure on growth-oriented stocks that are sensitive to changes in borrowing costs and discount rates.

Market commentators drew a connection between the change in rate expectations and Nvidia’s sudden stock reversal. Higher interest rates can raise financing costs across the economy, including for large capital projects. In the context of Nvidia, observers highlighted that more expensive funding could affect data-center construction, an important driver of demand in the company’s data-center and AI businesses.

Despite these macro concerns, the company’s underlying performance remained a key part of the story. Nvidia had just delivered strong quarterly results and an upbeat revenue growth outlook, which initially prompted the sharp move higher in the shares on Thursday. The subsequent decline on Friday reflected the market’s effort to balance this positive company-specific news with the potential headwinds from a more restrictive monetary policy path.