Okay so today was one of those days where I had four tabs of stock charts open and kept refreshing them like that was going to change anything. If you have any money anywhere near tech stocks you already know what Im talking about. If you dont, quick version: the Nikkei closed down over 12% today, the worst single day for Japanese stocks since 1987, and it dragged everything else down with it. The S&P dropped around 3%, the Nasdaq worse than that, and Nvidia, which has basically been the poster child for this whole AI boom, fell further on top of a rough couple weeks already, something like 6% by the close, after already being down roughly a quarter from its June high.
Ill admit part of why Im writing about this instead of something more useful is that Ive had a small position in Nvidia since early last year and I spent way too much of this afternoon doing math I didnt need to do.
What actually happened, as best I can piece it together: Fridays jobs report came in weak, unemployment ticked up to 4.3%, and that was enough to set off recession alarm bells (theres this thing economists watch called the Sahm rule, and it basically just tripped for the first time in a while). Then over the weekend the yen carry trade stuff unwound. The Bank of Japan raised rates last week for basically the first time in ages, the yen got stronger, and a bunch of trades that were built on borrowing cheap yen to buy other assets started getting unwound fast, all at once, which is never a calm process. None of that is really about AI specifically. But AI-adjacent stocks were already primed to get hit because the last couple weeks of earnings from Microsoft, Meta, Google and Amazon all had the same undertone underneath the good headline numbers: yes we are spending enormous amounts of money on AI infrastructure, and no we cannot really tell you yet when that turns into proportional revenue. Investors have apparently decided theyve heard that particular reassurance enough times for one quarter.
Im not going to pretend I know whether this is a real correction or just a scared Monday that mostly reverses by Thursday. Markets do this, and Ive been burned before trying to read too much into a single red day. But it was a useful reminder that the AI narrative and the AI reality are not the same thing, and a lot of the last year and a half of stock gains have been riding on the narrative holding up more or less unquestioned. Nvidia is still, by any reasonable measure, an extraordinary business. Its also a business whose stock price currently assumes that extraordinary keeps happening indefinitely, and today was the market briefly asking out loud whether thats a safe bet.
Small tangent because I cant help it: theres something almost funny about a decades-old Japanese monetary policy decision being the actual proximate trigger for a bunch of Silicon Valley chip stocks tanking on a Monday. We like clean stories about why stocks move (AI bubble, AI winter, take your pick) and then the real mechanism turns out to be an interest rate arbitrage trade most people watching CNBC have never heard of. The narrative and the plumbing are different things, and the plumbing usually wins, quietly, in the background, until a day like today when it doesnt stay quiet.
Anyway. Ive learned nothing new about how to time markets, my Nvidia shares are down for the week same as everyone elses, and Im going back to actually shipping things instead of watching tickers, which is a better use of a Monday night regardless of what the Nasdaq does tomorrow. If youre also sitting on some AI-adjacent stock right now: welcome to the club, the coffee here is bad and the spreadsheets are worse.