Dow is treading water: chip values are coming under the wheels

The crisis at Nvidia is spreading and the semiconductor sector is trading with heavy losses. Shortly before the final bell rings, Wall Street receives news of the nationwide flight halt. That's not good for airline stocks.

Concerns about the future of the chip company Nvidia and ongoing fears about interest rates pushed Wall Street mostly into the red on Friday. The Dow Jones index of standard stocks closed almost unchanged at 52,347 points. The broader S&P 500 fell 0.4 percent to 7,561 points. The Nasdaq technology exchange index lost 0.9 percent to 25,136 points.

However, on a weekly basis, the major indices recorded gains: the S&P 500 and the Nasdaq rose by 2.5 and 2.3 percent respectively, ending a four-week losing streak. The Dow gained around two percent.

Nvidia shares fell another two percent on Friday. They recorded their sixth week of losses in a row, making them the longest negative streak since October 2012. The day before, CEO Jensen Huang resigned following revelations about extramarital affairs. This is said to have included a relationship with a woman who is suspected by the USA of spying for China. According to a report in the Financial Times newspaper, the Nvidia board of directors has contacted the head of the British chip developer Arm Holdings, Rene Haas, as a possible successor.

The uncertainty at the top of Nvidia fueled concerns about the sustainability of the boom in artificial intelligence (AI). Huang has used Nvidia's balance sheet to finance much of its AI expansion, said Anthony Saglimbene, chief market strategist at Ameriprise Financial. "That's over now." The Democrats' significant victories in last week's midterm elections also raised fears that government regulations could slow the growth of AI companies.

The semiconductor index fell 3.4 percent. Advanced Micro Devices and Broadcom fell 8.8 and 4.8 percent, respectively. In addition, cloud and data center providers such as CoreWeave, Nebius and IREN recorded price losses. The declines in the AI ​​sector came ahead of AI company Anthropic's highly anticipated IPO next week.

Microsoft, on the other hand, closed 0.2 percent higher. The shares recovered initial losses after a global disruption to Outlook and Teams services was resolved.

Flight ban hits aviation industry

The airlines came under pressure in the last minutes of trading. The industry index closed 1.4 percent lower after the US Federal Aviation Administration (FAA) imposed a nationwide take-off ban on Friday. The authority justified this with exceptional circumstances and safety reasons after previously reporting serious problems with air traffic control communications.

On the economic side, US producer prices in October were somewhat weaker than expected. However, they rose by 6.5 percent year-on-year, the highest since November 2022. The data strengthened expectations for a rate hike by the US Federal Reserve in December. Markets are fully pricing in a rate hike of at least 25 basis points, according to data from CME FedWatch. The probability of an increase of 50 basis points is around ten percent. Several Fed officials signaled their willingness to raise interest rates further on Friday. San Francisco Fed President Mary Daly said she expects the central bank will have to raise interest rates. Her colleague from Boston, Susan Collins, said tighter monetary policy was on the horizon because of high inflation.