By Anna Szymanski
Nov 13 (Reuters) – There is never a good time for one of the world’s wealthiest men and biggest AI boosters to become ensnared in a scandal involving an affair with a potential Chinese spy, but this was a particularly bad time.
Ousted Nvidia CEO Jensen Huang’s shocking downfall came following one of the worst months ever for the AI trade, driven by rising debt costs, profitability concerns and political risk. His resignation on Thursday plunges the industry, markets and Nvidia itself into a period of heightened uncertainty.
What’s more, Wall Street is also now looking at the prospect of a more aggressive Federal Reserve rate tightening cycle on the back of October’s hot inflation print.
It may be a long road to the end of the year.
News broke on Sunday that Nvidia was conducting an internal investigation into whether Huang had been targeted by a foreign intelligence effort involving a Chinese businesswoman identified as Alice Huang, no relation, whose company Megaspeed reportedly facilitated the shipment of at least $7.5 billion worth of Nvidia’s advanced chips to China.
Nvidia has said its board has no reason to believe US national security or company secrets were compromised. Megaspeed has also denied any wrongdoing.
While it initially appeared that the damage might be contained, further reports on Wednesday that Huang had potentially engaged in another affair, this time involving one of his direct reports, led the board to consider ousting the man who many consider the “godfather of AI”. Huang stepped down the next day. Reuters later reported that Huang had a relationship with a second employee, according to two people familiar with the matter.
While Nvidia’s finance chief Colette Kress has taken over as interim CEO, questions about who could replace Huang permanently are swirling – as are debates about how much the White House knew about the spying scandal.
President Donald Trump said on Monday that he was “amazed” by the revelations concerning one of his closest allies in the tech world. But the New York Times reported that Trump had previously been briefed on Huang’s relationship and the spying concerns.
Meanwhile, Reuters reported on Thursday that senior White House officials are discussing whether Commerce Secretary Howard Lutnick should be pushed out for failing to do more to restrict chip sales to China.
Broad equity markets have held up surprisingly well so far. Wall Street ended a volatile session with only modest losses on Thursday, and the S&P 500 is only down around 3% from its recent record high.
That’s remarkable considering that the share price of Nvidia – whose market cap represented nearly 8% of the S&P 500 not that long ago – is down around 7% since Monday and now off around 30% from its October 6 high, having shed almost $2 trillion in a little over a month. (For context, that’s far more than the $1.4 trillion targeted valuation of Anthropic, the AI leader that kicked off its IPO roadshow this week.)
This market resilience is largely due to rotation into more defensive sectors like healthcare and consumer staples. The question now is whether this buoyancy will last.
One of the bright spots for tech this week came from an unlikely source: CoreWeave. The highly indebted “neocloud,” which saw its share price drop nearly 40% last month, enjoyed a bounce midweek after it released strong third-quarter results that indicated it should be profitable by the first half of 2028. However, the AI firm is heavily dependent on Nvidia, so it saw its share price fall back sharply on Thursday amid the Huang drama.
Highly leveraged firms like CoreWeave may have another reason to worry, as it looks like their already-elevated borrowing costs could be moving even higher.
The October CPI report released on Tuesday showed that consumer prices increased 0.4%, the third consecutive month of gains of at least 0.4%. While an official year-over-year inflation reading was unavailable because last year’s federal government shutdown prevented the collection of consumer price data in October 2025, economists’ estimates put the figure at 3.9% to 4.0%.
Perhaps most notable was the core monthly reading, which strips out volatile food and energy prices. It rose 0.3%. This came after Fed Governor Christopher Waller said the central bank ought to consider a jumbo 50-basis-point hike next month if core inflation came in at or above that level. As a reminder, Waller was calling for rate cuts less than a year ago.
Traders are now fully pricing in a 25-basis-point rate hike in December, versus a 74% chance last week. In response, the dollar hit a 19-month high against a basket of major currencies and was on track for its best week in two months on Friday.
This all raises more questions about why the Fed did not hike last month. The confusing and sometimes contradictory messaging suggests that Fed Chair Kevin Warsh’s new communications strategy may not be having the desired effect.
The timing of the tone shift is also curious because it comes just as one of the biggest inflation drivers this year – rising energy prices – appear to be reversing. Oil prices are down 18% from their recent peak, after President Trump said he was “highly unlikely” to resume strikes on Iran while negotiations were proceeding.
While Brent crude has crept up slightly in recent days to around $96 a barrel, few expect prices to spike without renewed US attacks. That’s because we may soon see a glut in crude markets.
But it’s also good to remember that the status quo in the Middle East can hardly be described as peace. Tankers are still regularly being hit in the Strait of Hormuz, and Saudi Arabia’s energy infrastructure suffered more damage this week.
Finally, for subscribers, we hope you received this newsletter by email, but if you didn’t, it’s likely thanks to a massive Microsoft outage that began on Thursday. This is the second disruption to hit Microsoft’s 365 services this year.
Looking to next week, it’s safe to say that Nvidia’s earnings on Tuesday are apt to dominate the financial news cycle, even with Anthropic’s IPO set for the same week. Everyone may be looking eagerly toward the Thanksgiving break, but a lot could still happen before then.
Before you head off, take a look at some questions ROI columnists have recently been exploring:
• Can the dollar’s rapid rise persist?
• Has Iran squandered its own best options for ending the war?
• Why might Taiwan’s equities have an advantage over South Korea’s?
• What is the new vulnerability in Europe’s energy system?
• Is the 2026 bond market storm over?
• Can Europe remain the clean energy cheerleader?
• Why do equity markets typically outperform after midterm elections?
• Why aren’t higher EU trade walls likely to keep China out?
• Which surprising metal was a victim of the AI selloff?
• Have gold prices found a floor?
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