Chipmakers at the heart of the AI race delivered stellar earnings. A jobs report confirmed the resilience of the U.S. economy. Quarterly results from the world's largest retailer showed consumers are still spending.
Despite signs pointing to a risk-on day for U.S. stocks, optimism on the trading floor didn’t last. The S&P 500 surged 1.9% shortly after the open but erased all gains by 1 p.m., sliding 1.1%—marking its sharpest reversal since April’s market turmoil and wiping out over $2 trillion in market value. The VIX volatility index climbed above 28.
Theories behind the reversal varied. Some traders cited renewed doubts over whether AI can generate enough revenue or profits to justify massive investments. Others linked the sell-off to Bitcoin’s drop below $87,000 for the first time since April. Some equity traders pointed to stretched valuations and concerns about heightened volatility ahead of Friday’s options expiration.
Here’s what Wall Street analysts, strategists, and traders had to say about Thursday’s wild swings:
**Chris Murphy, Co-Head of Derivatives Strategy at Susquehanna International Group**: "With Nvidia’s earnings out of the way and a Fed rate cut in December unlikely, investors are questioning what could drive a year-end rally. CTAs remain vulnerable; systematic strategies are still modestly net long, but deeper pullbacks may trigger further selling."
**Greg Taylor, CIO at PenderFund Capital Management**: "I think the early optimism was largely fueled by short-covering. Now, the market is sobering up for a rethink."
**Matt Maley, Chief Market Strategist at Miller Tabak + Co.**: "Does AI’s profitability truly justify the market’s lofty expectations? That’s the big question. Traders worry whether today’s AI investments will pay off in five years—so many are saying, ‘I need to take some profits now.’"
**Kimberly Forrest, CIO and Founder of Bokeh Capital Partners**: "It makes you wonder: If it’s so hot, why aren’t the profits showing up?"
**Craig Johnson, Chief Market Technician at Piper Sandler**: "Investors breathed a sigh of relief after Nvidia’s earnings, but the broader market needs more time to stabilize and recover."
