US technology stocks have been volatile over the past week. A sharp pullback after the US midterm elections was followed by a rebound. However, there were fresh jitters yesterday when NVIDIA Corp. CEO Jensen Huang resigned. Market participants have grown concerned that the valuations of AI-related stocks may be a bit high, and a significant pullback could have major market and economic implications.

• US midterms initially triggered a steep selloff. On November 5, the NASDAQ Composite Index fell 5.5%, entering correction territory, or more than 10% below its October record. The NASDAQ-100 dropped by 6.4%. Reports linked the drop to fears that Democratic control of Congress could bring tougher AI regulation and slow data centre growth.
• The one-day selloff was followed by a strong rebound. The Nasdaq Composite jumped by 3.6% this week to Wednesday. The NASDAQ-100 climbed back above 28,000 on Wednesday, helped by strong earnings of AI company, CoreWeave Inc.
• NVIDIA then became the focus. NVIDIA's board opened an independent investigation into Huang early in the week, and he resigned yesterday after reports about his personal conduct. CFO Colette Kress will be interim CEO.
• NVIDIA's chips power much of the AI buildout, and it has ties to many AI companies. Leadership uncertainty raises questions about the entire industry.
• Hotter-than-expected US inflation and expectations of more US Federal Reserve Board (Fed) interest rate increases pushed the 10-year U.S. Treasury yield higher, which can weigh on high-priced technology stocks.

The AI trade has powered this year’s market, so big swings in technology affect diversified investors too. With the Nasdaq Composite still well below its record high and a Fed decision on December 9, uncertainty may continue. A diversified portfolio and a long-term financial plan can help investors manage uncertainty.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.