Nvidia shares drop 3% amid AI sell‑off and rising bond yields

Nvidia (NVDA) stock fell 3% to $221.30 as hot inflation data deepened the chip sell-off. The decline occurred on Thursday, coinciding with a broader market downturn driven by fears that higher interest rates will make it harder for companies to fund AI investments.

Market Turmoil and Bond Yields

Nasdaq futures fell more than 1% on Thursday as the selloff in AI-related stocks intensified. This movement was part of a wider wave of selling that overwhelmed European stock markets during the first trading session of October, driven by a surge in bond yields. Government bond yields have returned to levels not seen for decades, with the Italian spread jumping to around 118 basis points and the 10-year yield hitting its highest level since October 2023.

The rise in borrowing costs has led to a slump in indices on both sides of the Atlantic. Analysts now anticipate a period of high interest rates lasting longer than expected, while geopolitical tensions in the Middle East continue to fuel energy shock concerns. Even Micron’s better-than-expected revenues and forecasts did little to help prop up the indices, although the European tech sector held up until the end despite the fall in the Nasdaq.

Wall Street Performance

Wall Street closed slightly higher on a day characterized by volatility linked to movements in Treasuries and oil prices. The Dow Jones index ended the session up 0.04% at 50,927 points, while the S&P 500 rose by 0.25% to 7,670 points. The Nasdaq recorded a decline, reflecting the specific pressure on technology and AI-linked equities.

Options desks are eyeing a dispersion reset as tech earnings line up with Federal Reserve decisions and midterm elections, sparking interest in dispersion trades. The sudden collapse of a £20bn data center deal has further stoked fears among AI investors, contributing to the dramatic bond sell-off and unnerving sentiment in the sector.