NEW YORK — Shares tied to artificial intelligence swung in and out of negative territory as traders quickly adjusted their bets on the chances of a December Fed rate cut, jolting volatility across Wall Street in preparation for a pivotal round of jobs and inflation reports on Nov. 29, 2025. That the softer data could at last pave the way for additional easing has emerged as just the latest trigger for dramatic gyrations in Nvidia, Alphabet, and other market leaders, after investors began questioning whether this artificial intelligence (AI) boom can still justify sky-high valuations.
Fed funds futures now reflect an 80%-plus likelihood that policymakers will cut rates again when they meet Dec. 9-10, from roughly a coin flip a week ago, according to CME FedWatch estimates compiled by research site Beansprout. That jarring swing in Fed rate-cut expectations has been exacerbating daily moves in the Nasdaq and key AI names, with traders using every economic release and central bank comment as potential catalysts.
Analysts say that next week’s readings on manufacturing, services, and consumer sentiment may either confirm the bullish rate-cut narrative or resurrect concerns that the central bank may once more postpone action. A recent Reuters week-ahead prediction said investors are keeping an eye on AI’s earnings headlines and macro data to gauge whether risk appetite is fading.
‘Dovishness’ bids meet frothy AI valuations.
Wall Street has already suffered one of its most turbulent stretches this year in October, with one session erasing more than $2.7 trillion in global equity value amid questions about an AI bubble and wavering on the pace of U.S. interest rate cuts. In another Reuters summary of the rally last week, elevated bets on a Fed rate cut in December were cited as giving major indexes a lift despite some concerns about the heights of tech valuations.
I haven’t seen a report with earnings due for about a month where the shares immediately give up something like this.” For AI leaders such as Nvidia, Alphabet, and Microsoft, the push-pull between earnings momentum and rate-cut timing has manifested in shocking intraday twists. Investors are growing more skeptical about how quickly giant artificial intelligence infrastructure spending will turn into profit, market strategists say, particularly if they’re disappointed by expectations for cheaper money. Weaker-than-expected data in the days ahead, meanwhile, could add to concerns about slowing demand even as it increases the odds of a rate cut by the Fed.
The macro backdrop has been a mixed bag so far. Challenger, Gray & Christmas, for example, earlier this month reported 153,000 announced job cuts in October — the biggest monthly total since at least 2003 — with the tech sector alone accounting for 33,300 jobs as companies press further into automation and AI. And that deterioration in the labor market has steeled expectations that yet another rate cut from the Fed may be on the way, even as official employment statistics have been distorted by delays stemming from a recent government shutdown.
History shows how tech has responded to Fed rate-cut cycles.
Markets have been here before. In the 2019 easing cycle, for example, the Fed cut rates three times even though unemployment was near 3.7% — a move that the Brookings Institution labeled anomalous in its review of the Fed’s 2019 “insurance” cuts, given strong growth and tame inflation. More recently, tech slumped by more than 30% in 2022 as aggressive rate hikes crushed lofty valuations and forced investors out of long-duration growth names, as Forbes calculated in its 2022 tech-rout analysis. Those episodes underscore that any given cycle of Fed easing has a different touchdown, depending on whether investors interpret it as insurance against mild headwinds or as a panic-driven response to an approaching downturn.
For now, traders say stocks with AI exposure will keep playing hostage to the same macro narrative as the wider market: every upside surprise in the – plus ça change – data chips away at rate cut odds. And vice versa for downside surprises, which inflate hopes of easier money and growing fears about growth. Until those cross-currents are resolved, the most celebrated AI winners on Wall Street could also remain its most volatile names.
