Wall Street holds firm amid Nvidia turmoil as dip buyers tread carefully

Many market participants are vocally concerned that Jensen Huang's departure signals the end of the AI rally. If social media commentary is taken at face value, tech stocks would appear to have already collapsed. However, the data tells a different story. As of the market close on Tuesday, the Nasdaq remains within 10% of its record highs set in early October and has gained 9% so far this year.

It is therefore worth pausing before declaring the bull market over.

US futures are maintaining a calmer tone on Wednesday, with S&P 500 futures rising 0.2% and Nasdaq futures adding 0.1%. This resilience persists even after the news that Nvidia CEO Jensen Huang has resigned. The chipmaker's shares are up roughly 3% in pre-market trading, a relatively strong performance given the circumstances.

The steadier sentiment follows Wall Street's notable recovery from its earlier lows on Tuesday. Dip buyers have not abandoned the market entirely.

However, that resilience should not be interpreted as an all-clear signal. While the Nvidia development is significant, the larger concern for tech stocks is ongoing investor scepticism about whether massive AI infrastructure spending will generate sufficient returns to justify current elevated valuations.

Treasury yields have surged again this week, further complicating the outlook for equities.

The 10-year Treasury yield has climbed back to 5.12%, while the 30-year yield has risen to 5.46%. This is unfavourable for growth stocks, whose valuations rely heavily on profits expected years into the future. Higher yields reduce the present value of those future earnings and make bonds a more attractive alternative.

So what does this mean for dip buyers?

There is still a case for Wall Street to stabilise, particularly with the Nasdaq only about 8% below its October peak. Panic has so far outweighed actual damage. Yet the margin for error is becoming very narrow.

Given lingering doubts about AI spending, renewed upward pressure on bond yields and uncertainty around Nvidia's leadership, the market is likely to be much less forgiving of negative news.

In short, the dip buying strategy has not been completely abandoned. But each misstep will now carry a far heavier penalty. That points to a nervous and unforgiving Wall Street rather than the outright crash some are predicting.