Remember, this is the chart of the dollar/yen exchange rate in purple, and the Nasdaq in orange.
The two have tracked closely resulting from the flow of global capital driven by the "yen carry trade" (i.e. borrowing Japanese yen effectively for free, converting that yen to dollars, and investing those dollars in the highest quality dollar-denominated assets).
But as we've discussed over the past month, the prospects of rate cuts to come from the Fed, combined with tightening policy in Japan, have triggered a reversal of the yen carry trade — out of dollars and dollar-denominated assets, and back into the yen.
So, the inflation data this morning was the final catalyst heading into what will be the Fed's first rate cut next week. And with no surprise in the inflation picture, it seemed clear that the continuation of the reversal of the yen carry trade would ensue.
Indeed, the morning started with aggressive selling in stocks. But at 11am EST, it all reversed — stocks, commodities, yields, bitcoin … everything.
What happened? Commentary hit the wires from the founder/CEO of the most important company in the world. Jensen Huang took the stage at a Goldman Sachs tech conference. And he said the demand for the new Blackwell chip is "so great … everybody wants to be first, and everybody wants to be most."
Did this turn markets? Maybe. But it's nothing new.
If we look back at Nvidia's August earnings, we already know demand is insatiable.
It's the rapid design cadence in accelerated computing and supply constraints that have capped Nvidia's growth capacity (at least at this point) — at a trend of $4 billion of new revenue a quarter. And if that trend continues, the year-over-year growth rate for Nvidia will be cut in half by this time next year (to something closer to 50%, from triple digits).
