Wall Street Jumps 1.4% as Investors Brace for a Sudden AI Shake-Up
Analysts warn a Meta–Google deal could divert up to 10% of Nvidia’s annual revenue, while reducing Meta’s dependence on Nvidia chips.
Quick overview
- Meta is considering adopting Google's tensor processing units (TPUs) in its data centers starting in 2027.
- U.S. stocks closed higher, driven by gains in healthcare and consumer shares, despite weakness in chipmakers.
- Retail sales growth slowed to 0.2% in September, leading to firm expectations for a December Fed rate cut.
- Chip stocks fell sharply amid concerns that a Meta-Google deal could impact Nvidia's revenue significantly.
Meta is considering using Google’s tensor processing units (TPUs) in its data centers starting in 2027, while Federal Reserve policy remains a key focus for investors.
U.S. stocks closed higher on Tuesday as gains in healthcare and consumer shares offset broad weakness in chipmakers. Expectations for a December Fed rate cut also held firm after new data showed slowing U.S. retail sales growth.
The Dow Jones Industrial Average rose 1.4% to 47,112.14, the S&P 500 gained 0.9% to 6,765.88, and the Nasdaq Composite added 0.7% to 23,025.59.
Retail sales slow in September
Sentiment has improved in recent sessions thanks to comments from several Fed officials, which fueled renewed bets on a December rate cut.
New York Fed President John Williams said last week that the central bank could still lower rates in the near term to support the labor market—a view echoed by Christopher Waller and Mary Daly.
According to The Wall Street Journal, allies of Fed Chair Jerome Powell have laid the groundwork for a potential rate cut at the December 9–10 meeting. But the move may face resistance inside an increasingly divided rate-setting committee, especially with October data still incomplete following the 43-day government shutdown.
Retail sales, released Tuesday, showed a 0.2% increase in September, sharply slower than August’s 0.6% rise. Economists had expected a 0.4% gain. Despite the weak print, market-implied odds of a December rate cut held near 80%.
The Fed’s preferred inflation gauge, the PCE index, will be published on Wednesday.
Tough session for chipmakers
Chip stocks tumbled after reports of a major potential shake-up in the AI hardware landscape involving Meta Platforms (+1.8%) and Google parent Alphabet (+1.6%).
On Monday, it emerged that Meta is in talks to invest billions in adopting Google’s TPUs—specialized AI accelerators used in Google Cloud—for its data centers starting in 2027.
The news boosted Alphabet, pushing it closer to the $4 trillion valuation mark. At $3.8 trillion, it now ranks as the world’s third-most valuable company, behind Apple and Nvidia.
But the semiconductor sector sold off sharply. Analysts warn a Meta–Google deal could divert up to 10% of Nvidia’s annual revenue, while reducing Meta’s dependence on Nvidia chips.
Among the biggest decliners were:
- Advanced Micro Devices (AMD): -4%
- Nvidia: -2.6%
- Arm Holdings: -2.4%
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