Nvidia Revives AI Trade, But Inflation and Rate Hike Fears Return

Nvidia's strong outlook on AI spending has revived confidence in technology shares, but hotter US inflation data and Federal Reserve Chair Kevin Warsh's hawkish message have put rate hikes back in focus.

The S&P 500 gained 0.5% for the week, with Nvidia's forecast of roughly 70% revenue growth in the next fiscal year reassuring investors about demand for AI infrastructure.

However, July US PCE inflation rose 3.7% year-on-year, above expectations, and Warsh said the Fed would have 'work to do' if inflation did not return to target.

This shift in mood on Friday led markets to raise the implied probability of a September rate increase to about 60%, from roughly 35% before his speech, with the US dollar rallying and gold falling more than 3%.